Incentive plans These are plans set up by the employer to motivate the employees in an effort to boost their production and performance. The incentive plans help make the employees feel as part and parcel of the business thus making them work hard. There are many types of incentive plans that are useful in making the employees attached to the company. The incentives come in different forms and can either be stock options or profit sharing. Stock Options The stock option incentive plans are plans that the employer makes to offer the employees with a chance to make investments in to the company stocks. The employees purchase part of the business stock, which acts as a motivator to work hard to make the company or business more productive, than when they are not part of the business. The stock offer gives the employees to hold a real stake of shares in the business. The employees get the chance of sharing the benefits from his or her work as part of the shareholders. The employers set a performance target for the employees, and those who meet the set targets become part of the stakeholders. This plan is beneficial to both the business and employees as both get the chance to reap the benefits of their hard work, (University of Michigan, 1981). Advantages of stock offer to the business The company gets its dividends payment in accordance to its performance in the market in relation to other competing businesses. Therefore, an increase in performance of a business means that it will receive more dividends compared to one whose performance is low. The business gains more profits also, as the employees are willing to go further in their efforts to achieve the set targets. The business owner is also sure that the employees will put in more efforts as they are a part of the business and their future depends on the success of the business. The stock offers also ensure that the employees stay in the company long enough, therefore, reduces the chances of having to constantly replace employees. Disadvantages to the business The company has to set aside money for giving the employees a stock option in the company. The company is at a risk if the employees do not work hard enough to achieve the target. Advantages to the employees The employees can gain a lot of money from the stocks if the market prices favor their company’s stocks. The employees also get a chance to get a share of their hard work, (Kracklauer, Mills, Dirk, 2004). Disadvantages to the employees The employees have to put in a lot of efforts to meet the target, and they have to wait for a long time to achieve this. This ties the employee with the company for a long time depriving him or her, the chance of moving to greener pastures. Profit Sharing This is an incentive plan for the businesses puts aside parts of the pre taxed profits and then share it out to the employees. The employee must meet the set conditions that will allow him or her to receive part of the profit. The common condition will be meeting target and having served in the business for a certain period, ( Fullerton, 2006). The mode of payments differs from one company to the other, and some of them put the money into the employees’ retirement funds. The other