Work out incentive payout instantly with clear inputs, formula shown and shareable results.
Incentive curves have three inflection points: a threshold below which nothing pays, target where 100% pays, and a cap. Between threshold and target the payout ramps from 50% to 100%; above target an accelerator of around 2% per point of over-achievement applies until the cap.
Below target
Factor = 0.5 + (Achievement - Threshold) / (100 - Threshold) x 0.5
Above target
Factor = 1 + (Achievement - 100) x 2%
Payout
Payout = Target incentive x Factor, capped
To avoid paying incentive for performance that does not cover the cost of the plan. Thresholds are typically set at 80-90% of target.
To protect against windfalls from a one-off deal or a mis-set target. Caps of 150-200% of target are standard.