This is one of most basic and commonly used forms of incentive compensation.
Short term incentive pay is determined a variety of factors:
1) existing company practice,
2) compensation committee discretion;
3) competitive peer assessment in the employer’s industry; previous work experience; and
4) future growth revenue projections of the company, just to name a few.
Often, the executive will receive a low base salary and a high percentage bonus, that is most often tied to overall company and individual performance during each year of employment. Generally, executive bonuses range from 50% to 75% of base salary for smaller companies to 75% to 150% for larger companies.