Explain different financial and non-financial incentives used to motivate employees of a company?
Financial incentives, which are in direct monetary from or measurable in monetary incentive. It includes basic pay, dearness allowance, house rent allowance, etc. some organisations provide pay hikes and increments for better performance.
The different financial incentive plans to motivate employees are:
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Pay and allowance: For every employee, salary is the monetary incentive. It includes basic pay, dearness allowance, house rent allowance, etc. some organisations provide pay hikes and increments for better performance.
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Productivity linked wage incentives: In this incentive, rewards are given to employees as a percentage of sales achieved. Its advantage is that reward is directly related to performance.
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Bonus: It is a one time reward for high performance. Bonus may be paid in cash or kind over and above the salary. E.g. performance bonus, 100% attendance bonus, festive bonus etc.
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Retirement benefits: Several retirement benefits such as provident fund, pension, and gratuity are provided to the employees as a financial security after retirement.
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Perquisites: Apart from basic salary, some companies offer fringe benefits and perquisites to employees, e.g. perks like rent free accommodation, education of children, medical allowance, car allowance, etc to motivate their staff.
Non-financial incentives: All the needs of individuals are not satisfied by money alone. Psychological, social and emotional factors also play an important role in motivating employees. The incentives which are provided to satisfy these needs are termed as non-financial incentives. Some of the important non-financial incentives are listed below:
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Status: In business terms, status means ranking of positions in the organisation. The authority, responsibility, rewards, recognition, perquisites and prestige of a job indicate the status given to a person holding a managerial position. It satisfies the psychological and social needs of an individual.
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Job enrichment: It is concerned with designing of jobs that include a greater variety of work content, requiring a higher level of knowledge and skill. This provides opportunity for growth and development of an employee on one hand and more autonomy and responsibility on the other, which becomes a source of motivation to the individual.
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Job security: It ensures stability of income and work, which motivates an individual to work with great zeal. However, it has one negative aspect that is it makes individuals feel that they are not likely to lose their job and hence may become complacent and careless.
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Employee participation: It means involving employees in decision making regarding the issue related to them. E.g. encourage participation in joint management committees, etc.
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Employee empowerment: It means giving more autonomy and power to subordinates. It makes people feel that their jobs are important, as a result of which, they contribute positively to the use of skills and talents in the job performance.
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