Financial Vs Non-Financial Incentives

FINANCIAL VS NON-FINANCIAL INCENTIVES

Incentives: - They are the rewards or remuneration that employees received in consideration of the work and help in motivating them. Includes monetary and non-monetary incentives

Financial Incentives: They are monetary benefits paid in cash or kind or both. .It is generally used to motivate workers and non-managerial employees. Types

1. Pay and allowances:
   • Salary is the major  monetary incentive
   • Includes basic pay, dearness allowance and also an annual increment in basic salary
2. Productivity linked wage incentives:
   • Salary/wages are based on the performance to increase productivity at the individual or group level. Example.
     • 10% commission on sales of above Rs 5000000
     • 15% commission on sales above 1000000                 
3. Bonus:
   • Incentives are offered in addition to the wages/salary of the employees.
   • May be paid in cash or kind.
   • Like Diwali gifts, holiday tours, cash reward
4. Profit-Sharing:
   • Employees are responsible for higher profits
   • Companies provide some shares in the profits.
   • Motivates them for higher profits and contributes to an increase in profits.
5. Co-partnership/ Stock option:
   • Offered company shares at a price that is lower than the market price.
   • Creates a feeling of ownership and encourages them for the growth of the organization.
6. Retirement Benefits:
   • Employees are worried about life after retirement will there will be a source of income
   • Provident funds, pensions, and gratuity provide financial security to employees after their retirement.
7. Perquisites (extra advantage.):
   • Gets free from employees and reduces employee turnover which
   • Includes allowances such as car allowance, housing, medical aid, and education for the children.

Non-Financial Incentives

• They do not involve cash but satisfy ego and self-esteem.
• They are generally used to motivate higher levels of management

Some of the important non-financial incentives are discussed below:

1. Status:

• Ranking of positions, good job title, separate cabin.
• Fulfill Psychological, social and esteem needs.

2. Career Advancement Opportunity:
   • Provide opportunities to employees to improve their skills and be promoted to higher-level jobs.
   • More on to a higher level.
3. Job security:
   • Employees want their job to be secure.
   • Job security gives mental relief and reduces future worries
4. Job Enrichment:
   • Job should include a greater variety of work content, require a higher level of knowledge and skill
   • Provide the opportunity for personal growth and work experience.
5. Employee Recognition Programmers.

Means praise for good work by superiors to perform for future performance. Example

• Congratulations on a good performance.
• Displaying name on the notice board.
• Certificate for best performance, mementos,

6. Employee participation:
   • Employees should be encouraged to participate in management decisions.
   • If Good suggestions come from employees it should be accepted and implemented.
7. Employee Empowerment:
   • More autonomy and powers to subordinates.
   • Managers feel proud and self-confident.
   • Managers learn to takes risky decisions within their powers.
8. Organizational Climate:
   • Organization climate Distinguish the best organization from the normal organization.
   • Like better working conditions like green environment , canteen facilities, gym , crèche for children, consideration to employees