Methods of Motivation – Financial Rewards
Methods of Motivation – Financial Rewards
Financial rewards are payments used by businesses to motivate employees to work harder and more effectively.
Types of financial rewards
Wages
Salaries
Bonuses
Commission
Profit sharing
Wages
Paid weekly, in cash or directly into a bank account
Common for manual workers (factory, warehouse)
Overtime is paid for extra hours worked
Advantages
Workers receive money regularly
Overtime encourages employees to work longer hours
Disadvantages
Wages must be calculated every week
Requires wages clerks, increasing costs
Time Rate
Workers are paid per hour worked
Example: $10 per hour × 40 hours = $400
Advantages
Easy to calculate
Workers know exactly how much they will earn
Limitations
Good and bad workers are paid the same
Needs supervisors and clocking-in systems
Time-sheets take time to process
Used when output is difficult to measure, such as bus drivers or receptionists.
Piece Rate
Workers are paid based on the number of products made
Higher output leads to higher pay
Advantages
Encourages workers to produce more
Limitations
Quality may be ignored
Can cause conflict between workers
Machinery breakdown reduces earnings
Requires expensive quality control systems
Used only when individual output can be measured.
Salaries
Paid monthly directly into bank accounts
Common for office staff and managers
Advantages
Easy to calculate
Lower administrative costs
Employer keeps money longer
Limitations
No overtime pay
Workers may not want to work extra hours
Some employees prefer weekly pay
Bonuses
Extra lump-sum payment for good performance
Paid in addition to wages or salaries
Advantages
Motivates workers
Makes employees feel recognised
Limitations
Can become expected
Causes resentment if not everyone receives one
Commission
Paid to sales staff based on sales made
Added to wage or salary
Advantages
Encourages higher sales
Can increase business revenue
Limitations
Stressful if sales are low
Too much competition between workers
Aggressive selling can damage reputation
Profit Sharing
Employees receive a share of company profits
Paid in addition to wages or salaries
Advantages
Encourages teamwork
Motivates employees to increase productivity
Limitations
No profits means no reward
Higher-paid workers receive more, causing unfairness