Ask HN: Should we give incentives ?

I've been thinking how to, or if we should, give incentives at my company.

We are slowly becoming profitable. We are "ramen profitable" since both of the founders live from our salary. But we have three angel investors who would like a reward on their investment. And seven more employees. I've been reading articles by HBS and some blogs.

One possible scheme i've thought of is this one.

First cover all costs including salaries, taxes, credit, etc. Build a 5% reserve for legal or other. As long as profits are 20% of sales or lower, pay them as dividends to investors. Redistribute any profits above 20% of sales to founders and employees.