Motivation> Financial and Non-Financial Incentives

Incentives are all measures which are used to motivate people to improve performance. Incentives are divided into two categories:

• Financial Incentives: Incentives that are directly associated with money.
• Non-Financial Incentives: Incentives that satisfy psychological and social needs, not directly monetary.

• Pay and Allowances – Salary/wages and allowances act as a financial motivator.
• Productivity-linked Wage Incentives – Wages linked directly to the level of productivity achieved.
• Bonus – A payment over and above the regular wage/salary.
• Profit Sharing – Employees are given a share in the profits of the organisation.
• Co-partnership / Stock Options – Employees are given the option to buy shares of the company, making them part-owners.
• Retirement Benefits – Benefits such as provident fund, pension, and gratuity that provide financial security after service.
• Perquisites – Additional benefits like company car, furnished house, medical facilities provided over and above salary.

• Status – The rank, authority, and prestige associated with a job position.
• Organisational Climate – The overall work environment and culture that affects employee motivation.
• Career Advancement Opportunities – Possibility of growth, promotion, and development within the organisation.
• Job Enrichment – Making the job more interesting and challenging to increase employee satisfaction.
• Employee Recognition Programmes – Formal acknowledgement of good performance (awards, praise, appreciation).
• Job Security – Assurance of continued employment, reducing anxiety and increasing focus.
• Employee Participation – Involving employees in decision-making processes.
• Employee Empowerment – Giving employees greater authority and responsibility to take decisions.

• Incentives are measures used to motivate people to improve performance.
• Financial incentives include pay, bonus, profit sharing, stock options, retirement benefits, and perquisites.
• Non-financial incentives focus on psychological and social needs of employees.
• Co-partnership/stock options make employees part-owners of the company.
• Job enrichment makes work more interesting and challenging, boosting satisfaction.
• Employee empowerment gives greater authority and responsibility to employees.
• Both types of incentives fall under the broader concept of Motivation in the Directing function of management.