Incentive Glossary

Incentive Compensation

Incentive is a form of compensation based on a volume-based measure such as a commission and bonus, or both.

Incentive Earnings

Incentive earnings is the amount calculated by the incentive formulas. It can be actual or planned depending on the usage. Actual earnings are what all the elements of the compensation plan calculate based on the actual attainment of the measures. Planned earnings are what all the elements of the compensation plan calculate based on 100% attainment of the measures.

Incentive Formula

An incentive formula is a mathematical calculation that determines the payout amount for an incentive measure such as a commission or bonus.

Incentive Leverage

Incentive Leverage is the multiplier relationship between sales results and incentive pay. The amount of leverage is tied to the amount of compensation that is at risk and the level of control a rep has over the sale. Highly leveraged positions have a greater potential for earnings but can also make much less if they fail to attain their goals.

Incentive Measure

Incentive measures are the metrics to be used to determine incentive pay. Examples of incentive measures are sales revenue, sales units, profitability. Also referred to as Performance Measure.

Incentive Pay

Incentive pay is a general term meaning any or all variable pay elements.

Linked Incentive Measure

A method of compensating based on more than one measure. The targets and breakpoints are unique per measure.

Measure

Incentive measures are the metrics to be used to determine incentive pay. Examples of incentive measures are sales revenue, sales units, profitability. Also referred to as Performance Measure.

Salary/Incentive Mix

The Salary/Incentive Mix is the portion of salary and target incentive to the total target compensation at 100% attainment of all goals.

Sales Incentive Leverage

The relationship of the elements in the compensation plan is expressed as a percent. It may be salary and incentive relative to Target Total Compensation or commission and bonus relative to Target Incentive Compensation. This is also known as leverage.

Sales Incentive Mix

SPIFF aka SPIF (Incentives)

SPIFF is a Special Performance Incentive for Field Focus or Special Product Incentive Fund. An added incentive amount for selling certain items such as overstock, out-of-season, or obsolete.

Leverage

Leverage is the multiplier relationship between sales results and incentive pay. The amount of leverage is tied to the amount of compensation that is at risk and the level of control a rep has over the sale. Highly leveraged positions have a greater potential for earnings but can also make much less if they fail to attain their goals.