D1 Financial Motivators
Financial motivators are methods of motivation that involve payment of money or methods that can be financially quantified. They include;
Salaries and wages are the payments that employees receive for working for a business. Salaries are set amounts that employees receive per month and wages are variable depending on the hours an employee works. To motivate an employee, managers may increase their salaries or wages. Another method may be to change the way in which an employee is paid from wages to a salary to give more financial security.
Commission is an additional payment on top of basic wages and salaries that is given to sales staff as an incentive to increase the amount of sales that they make. Sales staff are given either a percentage of each sale or a set amount of money per sale
Bonuses are additional payments given to employees on top of their salaries or wages. This may be for the completion of annual targets, completion of a contract or making an above expected level of revenue for a business.
Fringe benefits are additional benefits given to employees on top of their salaries and wages. Often referred to as ‘perks’, they may include a company car, gym membership, free food and drink or products and services sold by the company.
Performance-related pay is a method of linking salary to a pre agreed set of targets given to an employee. This may include sales targets, efficiency targets or to solve a particular problem related to their job role. Performance is reviewed regularly through an appraisal system and decisions on pay rises and bonuses are affected by how well staff have met their targets.
Share ownership schemes are when organisations give their employees shares in the company. As shareholders receive a dividend when the business is profitable and their share value increases as the business grows, they are more likely to be invested in the performance of the company. This can incentivise employees to actively seek out ways to be more productive and efficient to improve overall business performance.
Piece Rate Pay
Piece rate pay is a method of rewarding employees for their work by paying them for the amount of work they produce rather than the amount fo time they work for. Employees are paid a fixed amount of money per unit (piece) they produce. The idea is that the more an employee produces, the more they earn.
Piece rate pay was promoted by Frederick Taylor in the early 20th century and was popular with manufacturers such as Fords and is credited with contributing to significant growth in a range of industries. More recently, it has been reported that suppliers of clothing retailer, Shein are using piece rate pay in their factories with employees being paid a set amount per garment depending on the complexity.
Benefits and Drawbacks of Piece Rate Pay
Benefits of Piece-Rate Pay
Increased productivity: There is an incentive for employees to produce more units of output as they will receive more money for doing so. This increases the productivity of the business. It is estimated that the supply chain for Shein is producing millions of garments each week using this system.
Cost control: Managers can see the direct link between spending on employees wages and the output of the business. This helps them to easily calculate profit margins on each unit of output.
Encourages efficiency: As employees are paid more if they produce more, there is an incentive to improve their skills and techniques to minimise time wastage in production. By completing tasks more quickly and efficiently, they receive higher earnings.
Flexibility: As employers are not paying staff unless they are generating output, they may be more likely to allow staff to have flexible hours or work part time. This can reduce the turnover of staff with family or other commitments.
Drawbacks of Piece-rate Pay
Quality concerns: As workers are paid per unit of output, they may rush their work to increase their pay. This may lead to mistakes and a decline in quality which can negatively impact the brand reputation.
Neglect of non-paid tasks: In the pursuit of higher pay, workers may neglect tasks that are not directly included in the calculation of their pay. This may include following safety protocols or regular maintenance of machinery.
Potential for unethical practices: In the pursuit of profits, businesses may set low piece rates. This may lead to employees working long hours without adequates breaks to earn a liveable wage.
Inconsistent income: The amount of money an employee takes home fluctuates depending on their output causing financial instability and stress. This could be due to circumstances out of their contorl such as changes in demand for the company’s goods and services or an increase in other employees competing for work.
Wellbeing of staff: Employees are disincentivised to take breaks as this will reduce the amount of money they will take home. This can negatively affect their quality of life and put them at risk of accidents from being exhausted.
