Performance-linked incentives



A performance-linked incentive (PLI) is a form of incentive from one entity to another, such as from the government to industries or from an
employer Employment is a relationship between two party (law), parties Regulation, regulating the provision of paid Labour (human activity), labour services. Usually based on a employment contract, contract, one party, the employer, which might be a co ...
to an
employee Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract A contract is a legally enforceable agreement between two or more Party (law), parties that creates, define ...
, which is directly related to the performance or output of the recipient and which may be specified in a government scheme or a
contract A contract is a legally enforceable agreement between two or more Party (law), parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, Service (economics), ser ...
. PLI may either be ''open-ended'' which does not have a fixed ceiling for the quantum of incentive granted or ''close-ended'' which has an upper ceiling as stipulated in the scheme or the contract. Open-ended incentives are normally applicable to revenue-generating activities (e.g., sales, production, efficiency, competitiveness, etc), while close-ended incentives are associated with quality improvement or support functions (e.g., operations, human resources, administration, etc.)

Method of calculating PLI

Also, in calculating PLI, only the performance and not the potential of the recipient is considered. Potential of the recipient is normally subjective and can be contested. PLI is based on metrics which are absolutely objective and clearly perceived as fair by both the PLI provider and the recipient.

Government to Industry PLI schemes

PLI schemes can be applied in various other scenarios. One common scenario is government's PLI scheme to boost or transform the specific sectors of the industry, trade or commerce. Government's incentives to industry are of diverse types, such as government
subsidy A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
tax incentive A tax incentive is an aspect of a government's taxation policy designed to incentive, incentivize or encourage a particular economic activity by reducing tax payments. Tax incentives can have both positive and negative impacts on an economy. Amon ...
, cash payments, waiver of certain types, etc. For example, in 2020-2021 the
Government of India The Government of India (ISO 15919, ISO: ; often abbreviated as GoI), known as the Union Government or Central Government but often simply as the Centre, is the Government, national government of the Republic of India, a federal democracy lo ...
(GoI) introduced several targeted PLI schemes, which will run for five years, to boost 13 distinct industry sectors. Under these schemes the industry and companies are given the specific incentives which are linked with their performance on certain parameters. Objective of these schemes entail Make in India, incentivising foreign manufacturers to start production in India and incentivise domestic manufacturers to expand their production and exports.Explained: What is PLI scheme, and which sectors will be under it?
Indian Express, 8 Nov 2020.
The GoI has introduced Rs 1.97 lakh cr (US$ 28 b) PLI schemes for 13 sectors. For example one of these sectors is the
Automotive industry in India The automotive industry in India is the fourth-largest in the world as per 2021 statistics. In 2022, India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by ar ...
, for which GoI introduced 3 schemes, a Rs. 26,000 cr (US$3.61 b) scheme for production of
electric vehicle An electric vehicle (EV) is a vehicle that uses one or more traction motor, electric motors for propulsion. It can be powered by a Current collector, collector system, with electricity from extravehicular sources, or it can be powered autonom ...
s and hydrogen fuel vehicles (PEVHV), the Rs 18,000 crore (US$2.5 b) ''"Advanced Chemistry Cell"'' (ACC) scheme for new generation advance storage technologies for the electric vehicles, and Rs 10,000 crore (US$1.4 b) ''"Faster Adaption of Manufacturing of Electric Vehicles"'' (FAME) scheme to go green by expediting production of more electronic vehicles and replacement of other types of existing vehicles with the greener vehicles. The PLI scheme to boost automotive sector to encourage the production of electric vehicles and hydrogen fuel vehicles will also generate 750,000 direct jobs in auto sector. These schemes will reduce pollution, climate change, carbon footprint, reduce oil and fuel import bill through domestic alternative substitution, boost job creation and economy.India doesn’t need speed breakers. Modi govt right to help automobile, telecom
The Print, 17 September, 2021.
Society of Indian Automobile Manufacturers The automotive industry in India is the fourth-largest in the world as per 2021 statistics. In 2022, India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the List of countries and dependencies by ar ...
welcomed this as it will enhance the competitiveness and boost growth.Cabinet Clears ₹ 26,000 Crore Scheme For Auto Sector To Boost Production
NDTV, September 15, 2021.
What is PLI Scheme & Why the Automobile Industry is Going Gaga over It?
The Print, 20 September, 2021.

Employer to employee PLI schemes

PLI and Appraisal

Appraisals, normally conducted half-yearly or annually, are used to decide on the salary increments and promotions of the employee. These, being permanent increases, take both the performance and potential of the employee into account.

PLI's comparison with other benefits

PLI vs Salary

Salary A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. ...
is paid for the efforts that one puts in and PLI is paid for the results. Salary is paid in short, definitive cycles (e.g., weekly, monthly, fortnightly etc.) while PLI is paid in a longer cycle of monthly, quarterly or half-yearly, yearly.

PLI vs Bonus

Bonus is paid for the performance of the organization while PLI is paid for the individual's performance. Bonus is normally paid yearly or half-yearly. This is normally paid as a percentage of one's salary, or as a fixed amount, of the employee's individual performance.

PLI vs Retention Bonus

Some organizations give a retention bonus which is payable for the period that an employee stays back in the organization. This is paid for the value added by the employee by virtue of mere presence and not necessary for the efforts or work output. Normally retention bonus is paid yearly or half-yearly which will incentivise the employee to stay back in the organization for the payment

See also

Executive compensation Executive compensation is composed of both the Salary, financial compensation (executive pay) and other non-financial benefits received by an executive from their employing firm in return for their service. It is typically a mixture of fixed salary ...
* List of single-digit salary earners * List of largest sports contracts * List of highest paid baseball players *
Medical specialties A medical specialty is a branch of medical practice that is focused on a defined group of patients, diseases, skills, or philosophy. Examples include those branches of medicine that deal exclusively with children (pediatrics, paediatrics), cancer ...
, includes salaries respectively * Salaryman (Japan) * Peak earning years


External links

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Explanation of salary requirements and how to establish these. {{Employment Human resource management Employment compensation Recruitment