What is an Incentive Plan?
An Incentive Plan links variable compensation to goal attainment. You choose who the plan applies to, connect the goals that drive the reward, and set how much each level of achievement pays out. When a period closes, Factorial calculates every person's payout from their goal results and sends the amounts straight to your payroll cycle.
A plan brings four things together:
- People — who is rewarded by the plan (a whole company, legal entities, teams, roles, or specific people). Each person is paid through the variable compensation line on their contract.
- Goals — one or more goals, added as weighted metrics, that measure performance for the plan.
- Payout rules — for each goal, how an achievement percentage becomes a payout percentage.
- Periods — the recurring windows (for example each quarter) that payouts are calculated and paid for.
Incentive Plans live under Compensation. In your sidebar, go to Compensation → Incentive plans.
Before you start
To set up an Incentive Plan you'll need:
- The Compensation product enabled for your company
- The goals you want to reward already created (their period and recurrence must match the plan — only matching goals can be added)
- A variable compensation line on the contract of each person who should be paid, and a payroll concept to send the payouts to
How to create an Incentive Plan
- In your sidebar, go to Compensation
- Access Incentive plans
- Click New incentive plan
The plan is created in Draft status and opens a short setup with three steps: Basic information, People, and Goals.
Steps to follow
Step 1 — Basic information
Fill out the plan's details:
- Name and Description
- Period and Recurrence (Monthly, Quarterly, Semi-annual, or Yearly) — this splits the plan into the periods payouts are calculated for
- Payroll concept — where the payouts will be sent
- Applies to — choose the audience: Whole company, Legal entities, Teams, Roles, or specific People
Step 2 — People
Everyone matching your audience is added automatically. Each person needs a matching variable compensation on their contract to receive the payout — Factorial flags anyone who is missing one or has a conflict.
- Use Add compensation to contract to fix a missing variable line
- Use Remove person from plan to exclude someone
Step 3 — Goals
Click Add goals and select the goals that drive the reward
Only goals whose period and recurrence match the plan are shown.
Open Edit weights and rules to configure each goal:
- Weight — how much each goal counts toward the payout. Weights must total 100%; use Distribute weights equally to split them evenly.
- Payout rules — the tiers that turn achievement into a payout (see below)
Activate the plan
When the plan has a payroll concept, at least one person, and at least one goal, click Activate plan.
Once a plan is Active, its period, recurrence, and payroll concept are locked and can't be changed. Everything else (people, goals, weights, and rules) can still be edited and will apply to periods that haven't been sent to payroll yet.
Setting up payout rules
For each goal, payout rules define how an achievement % becomes a payout %, using one or more tiers. Each tier covers an achievement range (a Minimum and Maximum achievement) and uses one of two rule types:
| Rule type | What it does |
|---|---|
| Matches achievement | The payout percentage equals the achievement percentage — 90% achievement pays out 90%. |
| Fixed percentage | Pays a flat percentage you set, regardless of achievement. Use 0% for a lower band that shouldn't pay anything (an "all-or-nothing" cliff), or a fixed value for a guaranteed band. |
Add tiers with Add tier. Tiers must start at 0%, be contiguous with no gaps or overlaps, and never pay less for a higher achievement. Only the last tier can be open-ended.
Example: a goal with a first tier of 0–20% → Fixed 0% and a second tier of 20–100% → Matches achievement pays nothing below 20% achievement, then pays proportionally above it. So 15% achievement pays 0%, and 50% achievement pays 50%.
How payouts are calculated
At the end of each period, for every person in the plan:
- Each goal's achievement % for the period is converted into a payout % using that goal's payout rules
- The payout percentages are combined using each goal's weight (which total 100%) into one overall payout %
- The payout amount = the person's variable compensation (its maximum) × the overall payout %
| Goal | Weight | Achievement | Payout % |
|---|---|---|---|
| Revenue target | 60% | 80% | 80% |
| Customer retention | 40% | 50% | 50% |
Overall payout % = (60% × 80%) + (40% × 50%) = 68%. If the person's variable compensation is up to €4,000, their payout is €4,000 × 68% = €2,720.
Sending payouts to payroll
Once a period has closed and any people or goal issues are resolved, use Send to payroll cycle to push each person's calculated amount into payroll as variable compensation.
- Sending is done per period and can't be undone for that period
- Managers of the compensated employees are notified (email and inbox task) so they can review the amounts
What employees and managers see
Employees and managers can see how the reward was calculated, the goals involved, their achievement, weights, payout percentage, and the final amount, so the number is transparent and easy to explain.
Tips and best practices
- Make sure each plan's goal weights total 100% before activating — use Distribute weights equally as a starting point.
- Set the period and recurrence carefully before activating: they're locked once the plan is active.
- Use a Fixed 0% lower tier when a goal should only start paying above a threshold.
- Review each period's people and goal alerts before sending to payroll — sending can't be undone for that period.
FAQ
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Where do I find Incentive Plans?
Under Compensation → Incentive plans, not inside the Goals section.
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Can one plan reward more than one goal?
Yes. Add several goals and give each a weight; the weights must total 100%.
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Which goals can I link to a plan?
For now, only company- and team-level (shared) goals can be linked — individual goals aren't supported yet. The goal's period and recurrence must also match the plan.
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Where does the payout amount come from?
From the variable compensation line on each person's contract — the plan multiplies that amount by the calculated payout percentage. There's no separate amount typed into the plan.
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Can I change a plan after activating it?
You can still edit people, goals, weights, and rules (they apply to periods not yet sent to payroll), but the period, recurrence, and payroll concept are locked once the plan is Active. A plan can only be deleted while it's in Draft.
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What happens when the period ends?
Factorial calculates each person's payout from their goal achievement and your rules. You then review and Send to payroll cycle to move the amounts into payroll.
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Can I remove a goal that's used in a plan?
A goal linked to an active incentive plan can't be deleted until it's removed from the plan.