Here’s a question I get from MSP owners all the time: “Why do my employees keep asking for raises, but they’re not stepping up to grow with the company?”
The answer is usually uncomfortable, because your incentive program is probably rewarding the wrong things.
Most MSPs I work with have cobbled together compensation plans that sound good on paper. Annual 3% raises. Maybe a small incentive pay payout if the company hits revenue targets. A “nice job” email when someone closes a big client or solves a hairy technical issue. But in reality, these approaches don’t actually incentivize growth. They reward showing up and maintaining the status quo.
And in 2026, with the MSP talent market as competitive as it’s ever been, showing up isn’t enough. Your competitors are poaching your best people with promises of career development, flexibility, and real opportunities to advance. If you’re not deliberately building msp incentive programs for employees that align individual success with company growth, you’re going to keep losing talent, and momentum.
Let me break down what actually works.
The Problem With Traditional MSP Incentive Structures
Most incentive programs in the MSP space fall into one of two categories: too generic or too short-sighted.
Too generic looks like this: Everyone gets the same 2-3% cost-of-living adjustment at year-end, regardless of performance or impact. Top performers and average performers are treated identically. The message you’re sending? “We don’t really notice the difference in your contributions.”
Too short-sighted looks like this: Bonuses tied exclusively to individual metrics like ticket closure rates or billable hours. Sure, you’ll hit those numbers: but at what cost? Burnout skyrockets. Knowledge sharing drops. Long-term projects that build operational maturity get ignored because they don’t show up on this quarter’s dashboard.
Neither approach incentivizes people to grow: not their skills, not their leadership capacity, and definitely not their alignment with your company’s long-term vision. They incentivize box-checking.
So what’s the alternative? You need a framework that balances three critical elements: monetary rewards, career development pathways, and cultural recognition. And all three need to connect directly to organizational growth, not just individual output.
Monetary Incentives: Tie Them to Organizational Performance
Let’s start with money, because: let’s be honest: it matters. Your employees are asking for raises for a reason. But throwing cash at the problem without structure won’t fix anything.
Here’s what works in 2026: incentive pay tied to company budget attainment, not individual KPIs.
The cleanest version I’ve seen: pay people roughly 95% of market pay as base, then use ~5% as incentive pay to bring them to 100% when the company hits budget—with accelerators when the company exceeds goals. That keeps comp competitive, but it also creates a real (and measurable) connection between performance and pay.
And this only works if the incentive is driven by budget attainment metrics—the stuff that actually makes or breaks the year—like:
- Gross Margin attainment
- Project billables (and/or billable realization)
- Project completion rates (on-time/on-scope delivery)
Why does this work better than “bonuses tied to individual KPIs”? Because it fosters alignment instead of competition. Your Level 2 tech isn’t just trying to close more tickets than everyone else; they’re helping train the Level 1 tech because they know the team’s overall budget performance affects their incentive pay. Your account managers start talking to your service delivery team about client health instead of working in silos.
A few practical guidelines:
- Keep incentive pay calculations transparent. If people don’t understand how the math works, they won’t trust it.
- Set achievable but ambitious budget targets. “Stretch goals” should require focus and execution, but they shouldn’t feel impossible.
- Pay out quarterly or bi-annually so the feedback loop stays tight. Annual incentive pay feels too disconnected from daily work.
But here’s the thing: money alone won’t keep your top performers from leaving. It might buy you time, but it won’t fix the root cause. That’s where career development comes in.
Career Development: Show Them the Ladder
One of the biggest mistakes I see MSP owners make is assuming their employees know there’s a path forward. They don’t: because you probably haven’t shown them.
Your best technicians aren’t leaving because they hate the work. They’re leaving because they don’t see how to get from Tier 1 to Tier 2, or from Senior Engineer to Team Lead. And if you’re not actively demonstrating that path exists inside your organization, they’ll go find it somewhere else.
Building a clear career ladder requires three components:
1. Defined Role Progression
Document what distinguishes a Level 1 tech from a Level 2 tech from a Senior Engineer. Be specific. What certifications do they need? What skill sets? What types of projects should they be leading? Don’t make people guess what “the next level” looks like.
2. Regular Performance Cycles With Growth Plans
Annual reviews aren’t enough. You need quarterly or monthly check-ins where you’re explicitly discussing career progression: not just “how are things going?” but “what skills are you building toward your next role?” This is where you integrate both billable utilization targets and certification goals. Balance the short-term needs of the business with the long-term development of the employee.
3. Active Mentorship and Shadowing Opportunities
If someone wants to move into leadership, let them shadow your operations manager for a week. If they’re interested in sales, have them sit in on discovery calls. Growth isn’t theoretical: it’s experiential. Create opportunities for people to try new roles before they’re officially in them.
This is where our Grow Your Leaders and Grow Your Team services come into play. We help MSPs design and implement these structured career frameworks so you’re not figuring it out from scratch. Because here’s the reality: if you wait until your top performer hands in their resignation to start thinking about career paths, you’ve already lost them.
Non-Monetary Incentives: Recognition and Flexibility Matter More Than You Think
Let’s talk about the stuff that doesn’t show up on a paycheck but has an outsized impact on retention and engagement.
In 2026, non-monetary incentives have moved from “nice to have” to “table stakes.” Flexibility, professional development, and genuine recognition now rank equally with compensation when employees are deciding whether to stay or leave.
Here’s what’s working:
Flexible and remote work arrangements. If your entire business model is built on being able to work remotely for your clients, why can’t your team do the same? Hybrid or fully remote options reduce burnout and show trust. And trust matters.
Training budgets tied to individual interests. Don’t just send everyone to the same generic conference. Ask your team what they want to learn: whether it’s AI integration, cybersecurity specializations, or project management frameworks: and fund it. When employees feel like you’re investing in their growth, not just the company’s immediate needs, they stick around.
Public and peer recognition. This sounds simple, but most MSPs get it wrong. Sending a generic “great job” Slack message doesn’t cut it. Recognize specific contributions in team meetings. Let peers nominate each other for quarterly awards. Make excellence visible.
Personalized rewards. Pay attention to what your people care about outside of work. One of your engineers loves fishing? A gift card to Bass Pro Shops as a project completion reward hits differently than another generic Amazon card. It shows you see them as humans, not resources.
The thread connecting all of these? Culture. And culture isn’t something you can fake with pizza parties.
Operational Maturity and Culture: The Foundation Everything Else Sits On
Here’s the part most MSP owners don’t want to hear: if your operations are chaotic, no incentive program will save you.
Employees don’t grow in environments where firefighting is the norm, where processes change weekly, or where leadership decisions feel arbitrary. Incentives can’t compensate for a lack of operational maturity.
Before you roll out sophisticated incentive structures, ask yourself:
- Do we have documented processes for core service delivery?
- Are expectations clear and consistent across the team?
- Do we have regular one-on-ones to surface issues before they become crises?
- Is there a culture of feedback, or do problems fester until someone quits?
If you answered “not really” to any of those questions, you’ve got foundational work to do. Building operational foundations isn’t sexy, but it’s required. You can’t incentivize growth in a company that isn’t structurally capable of supporting it.
Culture also means creating an environment where growth is celebrated, not penalized. Are people afraid to take on stretch projects because failure means getting blamed? Do you accidentally punish high performers by piling more work on them without recognition or advancement? These dynamics kill growth faster than any compensation misstep.
Putting It All Together: A Practical Framework
So how do you actually implement this? Here’s a roadmap:
Step 1: Audit your current incentive structure. What are you rewarding right now: explicitly and implicitly? Are you paying for growth behaviors or maintenance behaviors?
Step 2: Define organizational growth metrics that everyone can impact. Choose 2-3 key indicators (like ARR growth, net retention, or strategic service adoption) and build team-based bonuses around them.
Step 3: Document career pathways for every role in your organization. If you don’t have role definitions, start there. Make progression visible and achievable.
Step 4: Schedule regular growth conversations. Monthly or quarterly. Not annual. Growth happens in increments, not once a year.
Step 5: Build a recognition system that’s consistent and meaningful. This doesn’t require budget: it requires intentionality.
Step 6: Invest in operational maturity. Fix the chaos. Document processes. Create stability. Growth can’t happen on shaky ground.
The Bottom Line
Your employees want to grow. But wanting isn’t enough if the systems, incentives, and culture aren’t aligned to support it.
The MSPs winning in 2026 aren’t the ones throwing the most money at retention problems. They’re the ones building intentional frameworks where individual growth and company growth are inseparable: where hitting targets means everyone wins, where career paths are visible, and where people feel genuinely valued for their contributions.
If you’re an MSP owner struggling to figure out how to structure these programs, or if you’re realizing your current approach isn’t working, that’s something we address through focused MSP consulting. Our Grow Your Leaders and Grow Your Team services help you design and implement incentive frameworks that actually drive growth: for your people and your business.
Because at the end of the day, your employees are only as incentivized to grow as you’ve made it possible for them to do so. Let’s change that.
Contact Us
Want help designing incentive pay and operating rhythms that actually drive growth (and improve company value across the board)? Contact us at RedVine Operations: redvineops.com/contact-us.