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Financial Incentives: The reward or incentive which can be calculated in terms of money is known as Financial incentives.The following are some of the financial incentives used in the organisations.
i. Salary and Allowances: In every organisation salary and allowances given to the employees forms the basic form of financial incentive. Regular raise in salaries and grant of allowances acts as a motivation for the employees
ii. Performance Based Incentives: Often organisation offer monetary rewards for good performance. This induces the workers to improve their efficiency and performance.
iii. Bonus: Bonus refers to the extra reward over and above the basic salary. It can take the form as cash, gifts, paid vacations, etc. For example, some organisations grant bonus during festival times such as Diwali bonus.
iv. Commission:Commission is the common incentive offered to employees working under sales department. Generally the sales persons get the basic salary and along with this commission on every sales order.
v. Retirement benefit: Some organisation offer retirement benefits such as pension, provident fund, gratuity, etc. to motivate people.
Non- Financial Incentive:The incentive which cannot be calculated in terms of money are known as non- financial incentives. These are-
i. Status: Status refers to rank, authority, responsibility, recognition and prestige related to job. By offering higher status or rank in the organisation managers can motivate employees having esteem and self actualisation need active in them.
ii. Organisational climate : It refers to relation between superior and subordinates. A positive approach adopted by manager creates better organisational climate whereas negative approach may spoil the climate.
iii. Career Advancement: Managers must provide promotional opportunities to employees. Whenever there are promotional opportunities employees improve their skills and efficiency with the hope that they will be prompted to high level.