Methods of Motivation – Financial Rewards
What are Financial Rewards?
Payments used by businesses to motivate employees to work harder and more effectively.
Act as incentives to improve performance and productivity.
Common methods:
Wage
Salary
Bonus
Commission
Profit sharing
1. Wages
Usually paid weekly (cash or bank transfer).
Common for manual workers (factory, warehouse).
Overtime may be paid for extra hours worked.
Advantages
Regular income; employees don’t wait long for pay.
Overtime encourages workers to work extra hours.
Disadvantages
Must be calculated weekly → time-consuming and costly.
Requires wages clerks.
a) Time Rate
Pay based on hours worked (e.g. $10 × 40 hours = $400).
Used when output is hard to measure (bus drivers, receptionists).
Advantages
Easy to calculate.
Workers know exactly how much they will earn.
Limitations
Good and poor workers earn the same.
Needs supervision to maintain effort and quality.
Requires clocking-in systems and time-sheets.
b) Piece Rate
Pay depends on quantity produced.
Often includes a basic rate + extra pay for higher output.
Advantages
Encourages faster work and higher production.
Limitations
Quality may be ignored → need costly quality control.
Can cause conflict if some workers earn more.
Machine breakdowns reduce earnings (minimum pay often guaranteed).
2. Salaries
Paid monthly, directly into a bank account.
Common for office staff and managers.
Fixed annual amount, divided into 12 months.
Advantages
Easy to calculate.
Business keeps cash longer.
Less frequent payroll calculations.
Limitations
Some workers prefer weekly pay.
No extra pay for overtime → less motivation to work longer hours.
3. Bonuses
One-off lump sum for good performance.
Can be paid yearly or during the year.
Paid in addition to wages or salary.
Advantages
Motivates employees.
Makes workers feel recognised and valued.
Limitations
Can become expected every year.
Causes resentment if only some workers receive bonuses.
4. Commission
Mainly for sales staff.
More sales = more pay.
Paid in addition to wage or salary.
Advantages
Encourages higher sales.
Can increase business revenue.
Limitations
Risk of pressuring customers → bad reputation.
Income is uncertain and stressful.
Excessive competition between staff.
5. Profit Sharing
Employees receive a share of company profits.
Used when individual contribution is hard to measure (service sector).
Advantages
Encourages teamwork and productivity.
Employees feel involved in business success.
Limitations
No profits = no extra pay.
Higher-paid workers receive more, causing dissatisfaction.