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INCENTIVE PAYMENT SYSTEM

A system of payment in which a proportion of earnings is related to either the level of worker effort or the level of output. Incentive payment systems therefore include systems of payment by results such as piecework , on both individual and group bases. It is, however, also used to cover schemes in which workers may be encouraged to perform well without any necessary relationship to production, e.g. attendance bonuses, merit pay, performance related pay . More rarely it is used to describe longer-term reward systems in which workers are entitled to a share in the company's performance and profitability, such as profit-related pay and employee share ownership plans. See financial participation .