Let’s be real—money talks. But when it comes to maintaining your team’s motivation and regularly performing at peak levels, the manner in which you reward them is as important as the amount by which you reward them.
This is where the appropriate incentive compensation model is crucial.
Whether you’re working with a starving sales team, a product team meeting sprint targets, or a customer success team enhancing retention rates, your compensation strategy can make or break performance.
So, what models really do work in today’s hybrid, fast-paced, results-oriented work culture? Let’s take a closer look at the top incentive compensation models that do more than simply fatten paychecks—they actually drive results.
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1. The Classic Commission-Based Model
Best for: Sales teams, account executives, revenue-driven positions
Commission-based comp is the old standby—still in demand for a reason. Employees receive a percentage of the revenue they bring in. Easy, scalable, and directly connected to results.
Why It Works
It provides a transparent, straightforward connection between effort and reward. More sales = more money. This creates urgency and ownership.
Pro Tip
Employ tiered commissions to incentivize reps beyond reaching their quota. Consider 5% to target, then 7% beyond it.
2. The Goal-Based Bonus Model
Best for: Marketing, customer support, project teams, HR, finance
This model establishes pre-set objectives—such as quarterly OKRs or KPIs—and rewards a bonus when those objectives are met. The objectives can be individual, team, or both.
Why It Works
It promotes alignment with overall business goals and makes non-sales employees understand how their efforts are rewarded.
Pro Tip
Connect objectives to impact, not effort. “Improve lead quality by 20%” is better than “run three campaigns.”
3. The Profit-Sharing Model
Best for: Startups, cross-functional teams, long-term retention strategies
In this system, part of the company’s profits are shared with employees, usually quarterly or on an annual basis. It’s a means of encouraging ownership and incentivizing all employees for shared success.
Why It Works
It reinforces the thought of “we win together.” It also instills loyalty—employees feel as if they’re stakeholders, not merely staff.
Pro Tip
Be transparent about the how and why of profit-sharing. Transparency fosters trust.
4. The Gamified Model
Ideal for: Sales development representatives, call center agents, any job that performs well in a competitive environment
This model employs contests, challenges, and points to reward behaviors—not achievement. For instance, awarding points for follow-ups, demos scheduled, or favorable reviews.
Why It Works
Gamification makes work enjoyable, social, and goal-driven. It increases engagement, particularly among Gen Z and millennial workers.
Pro Tip
Always tie game points to concrete rewards—gift cards, vacation time, swag, etc.
5. The Spot Bonus Model
Ideal for: Flexible teams, high-achievers, creative professionals, entire departments
Sometimes, formal incentives just aren’t enough. Spot bonuses are improvised rewards for stepping up and beyond—resolving a crisis, closing a monster deal, or shipping ahead of schedule.
Why It Works
Recognition in the moment feels sincere and real. It creates a culture of gratitude and flexibility.
Pro Tip
Publicize the recognition when you can. The recognition callout during a team meeting or on Slack can be just as effective as the money.
So, Which Model Should You Use?
Here’s the secret: you don’t have to choose just one.
The most successful teams mix and match models to fit their team structures. Commissions may be used for sales, product teams receive milestone bonuses, and every employee takes part in profit-sharing.
Whatever you decide, alignment is the key. Your incentive comp plan needs to mirror your culture, your business objectives, and most importantly—what really gets your people going.
Remember: a paycheck gets people in. An effective incentive plan keeps them engaged.
