This article attempts to summarise the process of designing incentive schemes for staff members of microfinance institutions (MFIs). It identifies certain basic principles for designing monetary staff incentive schemes, once the decision to implement such a scheme is taken by an MFI. After introducing some basic definitions from the human resource literature, this article looks at factors that influence the choice of staff incentive schemes. In addition, it presents several critical design issues for incentive schemes. It concludes with a list of common mistakes in designing incentive mechanisms and also derives some basic lessons related to it.