FINANCIAL REWARDS Flashcards
What are Financial Rewards?
Financial Rewards are given to employees by employers, typically as part of a extrinsic motivation scheme, typically with a specific monetary value.
Salary
A fixed regular compensation payed on a periodic basis to employees, usually monthly.
Advantages of Salaries
- Job Security
- Workers know that they will recieve regular income
Disadvantages of salaries
- Employees might not always be maximally motivated and productive.
- They know that if they do more or less the same amount of work every month, they will recieve the fixed salary. This can lead to a reduced productivity.
Wages (Time Rate)
Employees are payed on an hourly rate, or for a number of hours per week.
Wages (Time Rate) Advantages
- If the employees have to stay wokring extra hours, they will recieve extra payment.
- Employees feel like their work is being valued.
Wages (Time Rate) Diadvantages
- The pay workers recieve is not linked to the amount of output they produce, therefore they might go slow to recieve more money.
Wages (Price Rate) Advantages
- Boosted productivity because workers know that the more productive, the more reward.
- Employees see that their work has monetary value
Wages (Price Rate) Disadvantages
- Employees might focus more on quantity over quality
Wages (Price Rate)
Employees are payed for each unit produced.
Comissions
Staff is payed with respect to their sales results - An employee gets a percentage for each unit sold.
Advantages of Comissions
- Workers will try to achieve the best sale results as possible, which would result in a higher financial reward, while the business benefits from higher sales.
Disadvanatges of Comissions
- External factors affecting the sales can affect the income of workers. This can lead to them feeling demotivated.
Performance Related Pay
A bonus payed in addition to the employee’s ordinary compensations.
Examples of Performance Related Pays
- Pay Rise
- Performance Bonus
- Gratuity
Advantages of Performance Related Pay
- Motivated Workers
- Helps to develop a performance culture
- Creates Incentives
Disadvantages of Performance Related Pay
- Targets can be unrealistic
- Stressful
- Inappropriate for jobs where quality overrides quantity
Employee Share - Ownership Schemes
Permit employees to purchase shares at a discounted price or awarding them for free. This works well because that way, success of the company has direct financial benefit to shareholders.
Advantages of Employee Share - Ownership Schemes
- Keeps employees enganged
- Helps retain staff
- Incentive for employees to work harder
Disadvantages of Employee Share - Ownership Schemes
- The basis to awarding the bonus has to be clear and measureable to avoid favoritism.
- Might not yield direct profits
Profit Related Pay
The income of the employee depends on the prfitability of the company.
Advantages of Profit Related Pay
- Motivating for the workforce
- If the business shares the profit of the whole organization with the staff, this gives them a sense of ownership over the business.
Their success = The success of the company
Disadvantages of Profit Related Pay
- External Factors can affect sales and demotivate employees.
Fringe Payments
The extras that businesses offer in addition to their wage or salary
Advantages of Fringe Payments
- Employee loyalty
- Workers feel valued
- Help meet employee’s safety needs
Disadvantages of Fringe Payments
- Costly
- Division of staff can happen if benefits are not equal
