This article explains how clients can add a special Incentive Plan to an employee contract, giving employees additional compensation that is based on performance or tied to a specific Key Performance Indicator (KPI).
In this article:
What does an Incentive Plan Agreement mean within the Deel EOR model?
The goal of the Incentive Plan Agreement is to serve the interests of both the employee and the client.
Offering additional compensation tied to certain achievements is a great way to make sure your employees are focused on the right goals.
But any performance-based or KPI-measured additional compensation must be clearly outlined in an Incentive Plan Agreement. This will be created in addition to the Employment Agreement.
In the EOR model, Deel is the legal employer. Therefore, we need an additional step to formally explain that the employee incentive is based on a performance target outlined by a third company, which is not their official employer.
It is therefore treated as an annex to the Employment Agreement to ensure that we are legally compliant.
How do I create an Incentive Plan Agreement?
✅ Step 1 - Download and fill in template of an Addendum to the Employment Agreement - Incentive Plan
Please only change the highlighted portions of the Addendum to the Employment Agreement according to these steps:
- Fill in your organization's details, employee’s details, and the effective date
- Give a clear description for the KPI, according to which the employee’s commission will be measured
- Outline a minimum numerical requirement
- Outline the maximum numerical payout
- Fill in the table with a description of the KPI, targets, and the maximum payout amount for each quarter
- You can not change additional wording of the template, and any other edits may be rejected by our legal team for compliance reasons
The Addendum to the Employment Agreement is signed by both Deel and the employee. There is no need for you to sign it.
✅ Step 2 - Download and fill in template of the Addendum to the Scope Of Work
Fill in your desired effective date and sign it.
Please do not add any information or change any clauses in the addendum to the Scope Of Work except for the effective date.
The Addendum to the Scope of Work is signed by both you and Deel.
✅ Step 3 - Send both agreements to Deel
Please send the completed forms to: IncentivesPlans@deel.com
✅ Step 4 - Deel reviews Incentive Plan
Our Employee Experience team will review the documents and send the Employment Agreement Addendum to the employee for their signature.
We will keep you updated.
✅ Step 5 - Incentive Plan Agreement is uploaded
Once approved, we will upload the signed Addendum to the Scope of Work and the Addendum to the Employee Agreement to the Deel platform.
The Incentive Plan is now active.
[ACCORDION] What documents need to be signed to activate an Incentive Plan?
The Addendum to the Employee Agreement is signed by the employee and Deel.
The Addendum to the Scope of Work is signed by you (the client) and Deel.
Our Employee Experience team will review the forms and upload them to the Deel platform once approved, and the Incentive Plan will then be active.
[ACCORDION] Are Incentive Plan Agreements common?
It is considered best practice in many jurisdictions to have bonuses and incentive-based compensation plans formalized as a separate side agreement.
This is because, generally, the performance elements of a contract may be amended from time-to-time or even on a regular periodical basis. Therefore, a side agreement eliminates the need to amend the entire contract.
[ACCORDION] Is the Incentive Plan legally binding?
Yes. Since the incentive agreement is signed by both the employee and Deel, the official Employer of Record, it is legally binding and valid even if not included in the original Employment Agreement.