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Incentive pay rewards employees for achieving defined goals. The company sets performance objectives at the beginning of the pay period and if these are achieved, employees receive a lump-sum payment. Incentive pay plans can be based on the performance of the individual, team, business unit or company. Company-wide incentive pay schemes include gainsharing and profit sharing. The ability of an individual to influence the outcome of the incentive pay plan declines as the group being measured grows larger. However, team-based incentive pay plans offer advantages to companies.
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