Financial Methods of Motivation (Cambridge International IGCSE Business)
Spec point — • Financial rewards, e.g. wage, salary, bonus, commission and profit sharing
Financial methods of motivation
-
Financial incentives are rewards or payments given to employees in return for their labour - or 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 the lack of it leads to dissatisfaction
-
Maslow's Hierarchy of Needs argues that people move through levels of needs that motivate them - their lower-order needs are closely linked to financial rewards, whilst higher-order needs are rarely linked to pay
- Physiological and safety needs can be partially met by providing adequate pay
- Love and Belonging needs are often met by encouraging aspects such as team working
-
Financial methods of motivation
Financial incentives motivate some employees, depending upon the importance that they place on monetary items/money as a reward
Explaining the financial incentives
| Incentive Type | Explanation |
|---|---|
| Remuneration | - This refers to the basic wage or salary that a worker receives for their labour - Employees who work on an hourly rate are paid wages and accrue benefits such as annual leave according to the hours they work - Some workers may be paid a piece rate according to how many items they produce or sell - Salaries are paid to full time staff and usually accompanied by benefits such as a fixed number of days of annual leave |
| Commission | - A percentage of sales revenue is paid to workers who sell products or services - Commonly used in sales roles and motivates staff to sell more and upsell |
| Bonus | - An additional payment given to staff awarded for achieving specific goals, completing projects on time or exceeding performance expectations - The opportunity to earn more money may motivate staff to work harder and achieve better results |
| Promotion | - Promotion 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 |
| Fringe benefits | - These are additional benefits usually offered to salaried employees - Fringe benefits could include the use of a company car, private healthcare or gym membership - Employees can be motivated to work hard in order to keep their job and the associated fringe benefits |
Was this revision note helpful?
Build on this topic