That is always a tough matter....I think it should be a higher base pay and a quarterly evaluation of performance. If performance is up to par, then they receive the incentive. Although, you must remember ALL of the things the employee did, not just the two weeks before the incentive review!!

This takes care of your other two problems....as far as your incentive, you'll have to decide on what you think is fair. Here's where accurate time sheets and job logs are helpful.