Performance-linked incentives

Source: Wikipedia, the free encyclopedia.

A performance-linked incentive (PLI) is a form of incentive from one entity to another, such as from the government to industries or from an

employee, which is directly related to the performance or output of the recipient and which may be specified in a government scheme or a contract
. PLI may either be open-ended which does not have a fixed ceiling for the quantum of incentive granted or close-ended which has an upper ceiling as stipulated in the scheme or the contract.

Open-ended incentives are normally applicable to revenue-generating activities (e.g., sales, production, efficiency, competitiveness, etc), while close-ended incentives are associated with quality improvement or support functions (e.g., operations, human resources, administration, etc.)

Method of calculating PLI

Also, in calculating PLI, only the performance and not the potential of the recipient is considered. Potential of the recipient is normally subjective and can be contested. PLI is based on metrics which are absolutely objective and clearly perceived as fair by both the PLI provider and the recipient.

Government to Industry PLI schemes

PLI schemes can be applied in various other scenarios. One common scenario is government's PLI scheme to boost or transform the specific sectors of the industry, trade or commerce. Government's incentives to industry are of diverse types, such as government

Society of Indian Automobile Manufacturers welcomed this as it will enhance the competitiveness and boost growth.[2]

Employer to employee PLI schemes

PLI and Appraisal

Appraisals, normally conducted half-yearly or annually, are used to decide on the salary increments and promotions of the employee. These, being permanent increases, take both the performance and potential of the employee into account.

PLI's comparison with other benefits

PLI vs Salary

Salary is paid for the efforts that one puts in and PLI is paid for the results. Salary is paid in short, definitive cycles (e.g., weekly, monthly, fortnightly etc.) while PLI is paid in a longer cycle of monthly, quarterly or half-yearly, yearly.

PLI vs Bonus

Bonus is paid for the performance of the organization while PLI is paid for the individual's performance. Bonus is normally paid yearly or half-yearly. This is normally paid as a percentage of one's salary, or as a fixed amount, of the employee's individual performance.

PLI vs Retention Bonus

Some organizations give a retention bonus which is payable for the period that an employee stays back in the organization. This is paid for the value added by the employee by virtue of mere presence and not necessary for the efforts or work output. Normally retention bonus is paid yearly or half-yearly which will incentivise the employee to stay back in the organization for the payment

See also

References

External links

  • 17 Things Explanation of salary requirements and how to establish these.