FINANCIAL METHODS OF MOTIVATION Flashcards
What are FINANCIAL METHODS OF MOTIVATION
Using monetary reward as a method of influencing employee behaviour.
What is Remuneration
Remuneration are the methods that a business uses to pay their workforce
(Remuneration means money paid for work or a service. This is an example of how to use the word “they work in excess of their contracted hours for no additional remuneration”)
What is piece rate
Piece rate is a method of remuneration based on paying workers for each unit they produce. For example: A jewellery shop might have a payment structure in place where they pay their staff per necklace they produce.
What are advatages of piece rate
Incentivises workers to maximise output, increase labour productivity
Easy to administer
What are disadvantages of piece rate
Impact on quality - As workers will try to increase the amount of units they produce without the same quality, as they want to increase their pay. (workers focusing on their own needs rather than the companies) - There might also be increases in output at particular times of the year, like christmas, as workers want to spend more money around that time of year.
Creates ‘movement’, not motivation
Resistance to change
What is commision
Commision is a method of remunerating workers by paying them a share of any sales they make.
What are the advatages of commision
Incentivises workers to increase the number of sales they make
Employee costs raise in proportion to revenues. Lower revenues = lower wage bill
What are the disadvantages of commission
Incentivises controversial sales targets, the ‘hard sell’
Lack of job security
Difficult to pay all staff (i.e non sales staff - like a receptionist) by commision. If other members of staff are getting big raises because they are selling huge quantities of stock/ services, then how will that affect other members of staff that are not in the sales department.
What is a salary scheme
A salary scheme is a method of remuneration that is based on time worked.
Wages are quoted hourly and often paid weekly, and are often used for paying shop floor staff in retail and manufacturing.
Salaries are quoted annually and often paid monthly, and are used for paying managerial staff, or those in the service sector.
What are the advatages of a salary scheme
Creates job security
Easy to administer - avoids subjective judgements about performance/ output
Can be used alongside other methods to influence behaviour (i.e targets)
What are the disadvantages of a salary scheme
Some workers may feel that they aren’t rewarded for additional work
Does not provide an incentive for workers to increase their productivity
What is performance related pay (PRP)
Performance related pay (PRP) is a method of linking remuneration to the completion of pre - agreed objectives
What are the advantages of performance related pay
Employee targets can be directly related to corporate objectives
Clear and agreed targets are motivational
Links revenue/ important outcomes to pay
Can improve industrial relations (I.E less incentive to strike)
What are the disadvantages of performance related pay
Some targets may be subjective and therefore difficult to quantify and review
Conflict between workers with different objectives
