4b. Financial Incentives to Improve Performance

What are financial incentives?

Rewards or payments given to employees in return for their labour - or improved performance

What are the types of financial incentives?

• Commission

• Bonus

• Fringe benefits

• Promotion

• Remuneration

What are financial incentives?

Rewards or payments given to employees in return for their labour - or improved performance

What are the types of financial incentives?

• Commission

• Bonus

• Fringe benefits

• Promotion

• Remuneration

What are some different perspectives on the role of money in motivating employees?

• According to Herzberg's Two-Factor Theory, money is not a motivator, but its absence can lead to dissatisfaction (hygiene factor)

• Maslow's Hierarchy of Needs suggests that money helps satisfy basic and safety needs (e.g., food, shelter), but once these needs are met, money no longer serves as a motivator

What are remunerations?

• The basic wage or salary that a worker receives for their labour

• Employees who work on an hourly rate are paid wages

• Salaries are paid to full time staff and usually accompanied by benefits

What are commissions?

• A percentage of sales revenue paid to workers who sell products or services

• Commonly used in sales roles and motivates staff to sell more and increase their sales revenue

What is a bonus?

• An additional payment given to staff as a reward for achieving specific goals, completing projects on time, or exceeding performance expectations

• The opportunity to earn more money may motivates staff to work harder and achieve better results

What are promotions?

• Usually demands a higher level of responsibility from an employee in the job role

  • Higher pay is usually offered to reflect the increased responsibility 

• A clear promotion pathway can act as a motivator to improve productivity and staff performance

What are fringe benefits?

• These are additional benefits usually offered to salaried employees and include benefits such as a company car, private healthcare, gym membership etc

• Employees can be motivated to work hard in order to keep their job and the associated benefits