Financial Incentives

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Financial Incentives 2018-04-06T11:01:43+00:00

Financial Incentives

In the context of existing economic system, money has become a means to satisfy the physical needs of daily life and also of obtaining social position and power. Since, money has the purchasing power, it becomes very important incentive for every individual. Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. These incentives may be provided on individual or group basis. The financial incentives generally used in organisations are listed below:

(i) Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance and other allowances. Salary system consists of regular increments in the pay every year and enhancement of allowances from time-to-time. In some business organisations, pay hike and increments may be linked to performance.

(ii) Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.

(iii) Bonus: Bonus is an incentive offered over and above the wages/ salary to the employees.

(iv) Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation. This serves to motivate the employees to improve their



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