What is the term for extra pay awarded for achieving or exceeding certain performance targets?

The term for extra pay awarded for achieving or exceeding certain performance targets is best represented by incentive pay. This concept refers to compensation designed to motivate employees and drive them towards reaching specific goals or benchmarks. Incentive pay can take various forms, such as bonuses, commission, or merit pay, but the overarching category is incentive pay because it focuses specifically on rewarding performance.

Bonus plans, while they can be a mechanism within incentive pay, generally specify a one-time payment given for reaching certain goals rather than being a broader category of compensation tied to performance. The same goes for merit pay, which usually refers to permanent salary increases rather than one-time payments. Commission often relates specifically to sales roles, where pay is directly tied to the volume of sales made, and again is more specific than the general concept of incentive pay.

By understanding that incentive pay is the umbrella term encompassing various performance-related compensation strategies, it provides clarity on how businesses encourage productivity and reward outstanding employee contributions.