- Pay-for-performance plans tie an employee's compensation to individual and/or organizational performance. Common types include incentive plans, variable pay plans, and profit sharing plans. - Most organizations use some form of short-term incentive plan, while long-term incentive plans are more common for executives. Merit pay, team incentives, and gain/profit sharing plans are also widely used. - For pay-for-performance plans to be effective, the incentives provided need to be substantial enough to motivate improved performance. Plans also require clear, measurable goals and standards of evaluation.