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Question
Explain different financial incentives used to motivate employees of a company.
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Solution
Financial incentives refer to direct monetary incentives offered to the employees to motivate or reward people for better performance. The following are some of the financial incentives used in the organisations.
- Salary and Allowances: In every organisation salary and allowances given to the employees form the basic form of financial incentive. Regular raises in salaries and grants of allowances act as motivation for the employees.
- Performance Based Incentives: Often organisation offer monetary rewards for good performance. This induces the workers to improve their efficiency and performance.
- Bonus: Bonus refers to the extra reward over and above the basic salary. It can take the form of cash, gifts, paid vacations, etc. For example, some organisations grant bonuses during festival times, such as Diwali bonuses.
- Stock Option: Under this incentive scheme, the employee is offered the shares of the company at a price lower than the market price. This instills a feeling of ownership and belongingness in the employee and urges him to contribute towards the goals of the organisation.
- Sharing of Profit: Herein, the organisation shares a portion of the profit with its employees. This encourages the workers to contribute actively towards the growth of the organisation.
- Retirement Benefits: Many organisations offer certain retirement benefits to their employees, such as pensions, gratuity, provident funds, etc. This provides a sense of security and stability to the employees.
- Fringe Benefits: Besides the basic salary an organisation may offer certain additional advantages to its employees, such as housing allowance, medical allowance, etc.
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Ram Murthy, the CEO of ‘Goodcare Hospitals’, a leading chain of hospitals, decided to reward the good work of the doctors of his organisation. For this, he instituted two running trophies. A ‘Healthcare Achievers Trophy’ to acknowledge and appreciate the tireless efforts of the doctors who rendered selfless services to the patients and another ‘Beti Bachao Trophy’ to recognise the outstanding work done by the doctors in saving the girl child.
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