Incentive Compensation Plan Template - Free Download
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Sample Incentive Compensation Plan
Purpose of Incentive Compensation Plan
The purpose of an Incentive Compensation Plan is to motivate and reward key employees for
accomplishing individual performance goals established in accordance with the business targets of the
organization and Company.
Incentive Compensation Plan Guidelines
• Organization managers nominate key individuals who are crucial for, and have leverage on, the
success of the organization to participate in the incentive compensation plan. Nominations must be
made prior to the beginning of the plan year.
• Key employees hired prior to July 1 may be added to the plan for the calendar year in which they
are hired. Their award will be prorated based on their amount of service.
• The President must approve each nomination and the incentive award target, based upon the
nominees’ potential and expected contribution to achieve near-term health and long-term growth of
• The plan participant must be employed by the company at the time of the incentive plan payout
(which will occur within 75 days after the close of the plan year) to receive a payout. As an
exception, participants who had a full-time regular status for at least six full months during the plan
year, and who terminated due to death, retirement, permanent disability (as certified by a medical
doctor), or reduction in force, will receive (or their beneficiaries will receive) an incentive award,
prorated based on their length of service, within 75 days of the close of the plan year.
• Participants may be removed from the incentive plan due to reassignment or poor performance.
• At the beginning of the plan year the President will publish business targets, and approve the
incentive plan participation list.
• The amount of the incentive award will range from 0% to 150% of target and will be determined
by the employee's manager, based on actual performance relative to the participants' goals.
• Incentive awards must be approved by the President prior to payment.
• Participants may choose to defer the payment of their incentive award (or a portion of their award
in 25% increments) beyond the vesting date. There are two deferral options: a) 5 years beyond the
plan year, and b) 10 years beyond the plan year. The deferral election must be made in writing
prior to the beginning of the plan year. If no deferral election is made, the award will be paid as
indicated above. The deferral election cannot be modified once the plan year has begun.
• Deferred incentive plan awards will earn interest based on <a standard index>, as calculated by
• Employees who elect to have their incentive award deferred, and who terminate prior to the
deferral payment date but after the payment date of non-deferred awards, will receive the award, as
soon as administratively feasible, after their termination.