How Businesses Motivate Employees

• Financial incentives -

  these are rewards/payments given to employees in return for their labor/improved performance
• The different theories of human motivation offer varying perspectives on the role of money in motivating staff
• Herzberg’s two factor theory says that money is not generally a motivator, but removing it would lead to the dissatisfaction of employees
• Businesses commonly use a mixture of financial and nonfinancial methods to motivate workers. This helps to meet the individual needs of different workers they employ, and helps avoid waste for financial rewards on those unlikely to improve their performance.
• What are all the different types of financial incentives?

  • Piece Rates
  • Remuneration
  • Promotion
  • Time Rates
  • Fringe Benefits
  • Performance Related Pay
  • Commision
• Remuneration : money paid to employees for their work/services
• Time Rate : payment system based on the amount of time employees spend at work
• Gross Pay : pay before deductions
• Net pay : pay after deductions
• Overtime : rate of pay above the normal rate to compensate employees for working extra hours
• Piece Rates : payment system where workers receive an amount of money for each unit produced .
• PRP : payment system designed for non-manual workers were pay increases, are given, if performance targets are met
• Bonus systems : payment, in addition to the basic wage for reaching targets/in recognition for service
• Commission : payment based on the value of sales, usually a percentage of sales made
• Fringe benefits : perks over and above the normal wage/salary
• What are the advantages of time rate?

  • suitable method of payment, when it is difficult to measure the output of workers
  • workers will want to spend more time at work meaning they will produce better quality services/goods. Also they will make less mistakes.
• What are the disadvantages of time rates?

  • if more workers work overtime, they will be more stress. This will lead to less productivity/motivation.
  • productivity is not rewarded. People are only paid for their attendance. This means that discipline workers will get the same as those who try to avoid work.
• What are the advantages of piece rates?

  • it rewards productive workers, workers who are slow/lazy will not earn as much
  • this method motivates workers to be more time efficient
• What are the disadvantages of piece rates?

  • The quality of output may suffer if people work too fast
  • workers might use dangerous practices, trying to work too fast and complete their work
• What are the advantages of performance related pay?

  • A good method to motivate non-manual workers
  • this method improve the workers as individuals and improve their soft/hard skills
• What are the advantages of performance related pay?

  • some workers may feel that the performance targets set are too demanding
  • The financial incentives may not behind off to motivate workers to improve their performance
• What are the advantages of bonuses?

  The money is only paid if it has been earned so it can motivate workers
• What are the disadvantages of bonuses?

  bonus payments may be biased
• What are the advantages of commission?

  • it attracts sales talent and they thrive in competitive environments
• What are the disadvantages of commission?

  Financial inconsistencies, they can be inconsistent during slow sales
• What are the advantages of promotion?

  encourages motivation and staff loyalty
• What are the disadvantages of promotion?

  promotions can lead to conflict/unhealthy competition

  promotions can be biased
• What are the advantages of fringe benefits?

  employees can pay less on tax
• What are the disadvantages of fringe benefits?

  cost inflation for employers
• What are all the non-financial reward?

  • Job rotation
  • Job enrichment
  • autonomy
• Job rotation : allowing employees to change jobs from time to time to promote experience and variety
• What are the advantages of job rotation?

  • Job rotation, promotes responsibility, flexibility, and it prevents boredom
• What are the disadvantages of job rotation?

  • employees lose specialization aspect, they can be confused/stressed, it can be inefficient which ends up with less productivity
• Job enrichment : Jobs being made more challenging plus rewarding
• What are the advantages of job enrichment?

  • less workload for managers, they could build their skills, greater rewards/recognition and increased confidence
• What are the disadvantages of job enrichment?

  • increased workload for subordinates and unwelcome pressure
• Autonomy : giving workers the authority to make choices and decisions about the way they work
• What are the advantages of autonomy?

  reduce the chain of command and increased communication
• What are the disadvantages of autonomy?

  employees may respond negatively, if not given extra pay employees may not be as confident