INCENTIVE – Key to Employee motivation

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The most important asset to any establishment is its employees. Employee contentment should be at the forefront of any organization’s agenda. Employee plunders are an essential factor in effective employee engagement strategies, but most business leaders still struggle to implement them successfully. When you have hired some stellar people, it is imperative to create an environment that motivates employees to stick around for a length of time that enables them to fulfil their potential.

Studies have indicated that employee happiness should be at the forefront of corporate agenda for any company. The same studies have shown that increased employee engagement is directly associated with lower turnover of staff, higher productivity, and lower costs.

It is also important to note that businesses need a multi-dimensional strategy when it comes to incentivising employees at the workplace. Therefore, whilst rewarding employees with money can be effective in the short-term, not everyone is motivated by money, so non-financial rewards can also be important in a diverse workplace environment.

An incentive is an object or item of value or any desired action or event that offshoots an employee to do more of whatsoever was encouraged by the employer through the selected incentive. Recent studies have shown that a together of financial and non financial incentives can motivate employees to perform best in their job.

Here are few financial Incentives used to encourage employees to improve their performance:


  • Pay and Allowances;
  • Bonus;
  • Profit Sharing;
  • Productivity Linked Remuneration Incentives;
  • Co-partnership Option;
  • Retirement Benefits;

We will now consider each of the above incentives in a bit more detail.

Pay and Allowances

Salary is the basic financial incentive for all employees. It is a remuneration of employees for the work that they do for the employer and the amount of salary will, of course, depend on the employees skills set, expertise, experience and other factors such as the supply/shortage of the skills set that the employee has.

A flat salary can also be supplemented with additional monetary rewards such as commissions, travel allowances, health insurance subsidies and other rewards to off-set the employees’ tax contribution as well as other expenses involved in engaging with work.


The bonus is a form of incentive which is given over and above the salary of the employees. Bonuses can come in various different forms and are often provided in the form of prizes to be competed for by a number of employees in a particular group. For example, a department – consisting of 10 employees – within an organisation may compete for a bonus (of a certain monetary value) if the employees in that department were to reach a certain target such as a certain sales figure or project milestone.

This helps motivate employees to better engage with monthly or quarterly project or milestones.

Profit Sharing

Profit sharing is a form of incentive used by some companies, whereby employees are given a shareholding in the company over and above their salary. This is a very serious form of incentivisation which essentially ties the employees’ overall earnings – as well as potential future earnings – directly to their day-to-day performances. This form of incentivisation is usually tied to certain contractual clauses whereby the employees’ right to their shareholding is realised upon their spending a specific period of time at the company.

This gives the employees the incentive to stay longer at the company and to personally work hard to make the company as successful as possible so that the company rises in value which correspondingly increases the value of their own shareholding.

Co-partnership Option

This is another form of incentivising employees by providing them some ownership in the business, but at a value which is lower than the market-price. This is a pragmatic way of offering ownership to employees whilst not significantly diluting the shareholdings of other larger shareholders.

This helps in creating a feeling of ownership among employees and encourages them to give maximum contribution towards the development of the organisation.


Perquisites and fringe benefits, such as car allowance, medical aid, housing, and education for the employees’ children are also provided by few companies over and above the salary. The benefit of offering employees this type of incentive is to provide them with all of the necessary tools such as car and housing to enable them to solely focus on their work. It also helps companies stave off competition for talent from their competitors as only a very select and elite group of companies offer this type of benefit. The incentive, in this case, for employees is that very few other, if any, companies would offer them similar packages, increasing the likelihood of employees staying at their jobs for much longer.

Usually, non-financial incentives are those incentives which benefit in satisfying psychological, social and emotional requirements of an employee. However, the financial aspect may also be there in non-financial incentives.

For example, promotion of an employee in an organization satisfies him psychologically as he gets a feeling of growth in position and authority.

Here are non-financial incentives to encourage people for improving their performance:

Job title and Career Advancement Opportunity

Job title means a position in an organization. A higher status within the organisation conveys authority, responsibility, prestige and recognition which helps in satisfying the psychological, social and the personal esteem of an individual.

Promotion within the organisation is a very important component in encouraging employees to improve their performance, as well as giving the employees a sense of accomplishment and a feeling that continuous hard work will be rewarded with further promotions.

Managers should provide appropriate changes to employees’ status to improve their performance so that they can be promoted to next level jobs.

Taking Care of The Family

If any U.S. employee passes away while working for some of the big organization, the employee’s spouse receives 50% of the deceased’s remuneration annually for the next decade. This provides employees with a sense of security for their families and will help extract their loyalty to the company.

Keeping Employees Healthy

Although everyone in the UK received free health service from the National Health Service (NHS), providing employees with private medical insurance can always act as a motivating factor as the employees will not only feel that they are receiving medical treatment which may be a slight improvement on what is publicly available, but they will also feel as if their commitment is being recognised by the employer in an elaborate way.

Although few companies have the scale and the financial power to provide private medical care to their employees, those that do provide it see higher rate of staff retention and better performances.


By Mahshid Javaheri

Mahshid Javaheri


After working as a solicitor for 3 years, Mahshid joined as an Editor and contributor of legal content. Mahshid is passionate about connecting practicing lawyer with the wider business community; she helps lawyers create and distribute insightful and actionable legal content that delivers value to businesses, whilst showcasing the lawyers’ expertise.

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