It Pays to Understand Incentive Pay

Incentive pay is an extra payment given to employees or those included in the payroll of a specific company or organization that renders special tasks or extra chores. Incentive pay is named and institutionalized after the recognition of the extra effort or additional risks an employee does or takes to accomplish job-related tasks. Incentive pay is sometimes referred to as pay for performance, simply because it is a payment for the rendering of a performance and not payment as a hired individual reporting for a specific period of time. Incentive pay is usually not taxable.

Incentive pay is usually computed through a prorated computation in line with the individual's existing monthly salary. Payment of incentive pay starts and ends simultaneously with the commencing and termination of the task or position. Individuals should first qualify for an incentive pay, which will be determined when the individual is eligible and the task accomplished is sufficient enough for incentive pay requirements.

Different types of incentive pay applies to different professionals, based on the differences in the execution of work and the use of skills, knowledge and competency, as well as the potential harm and danger an employee faces in the course of the job.

In the army, incentive pay is commonly used to refer to the additional payment being given to soldiers assigned to tasks or missions that automatically entitle them to incentive pay (i.e. parachute pay for parachute jumps; demolition pay for tasks involving demolition of explosives; and hazardous duty pay for flight deck, experimental stress, toxic fuels and toxic pesticides, dangerous viruses and bacteria and chemical munitions duty). Because incentive pay is in line with tasks at hand, those who are transferred to other units or other missions stop receiving incentive pay, unless the new mission or new unit also entitles the soldier to receive incentive pay.