Retaining Workforce - Financial Incentives

Financial Forms of Motivation

• Piecework - Piece rate
  • Payment based on number of items each worker produces
  • Can be a good way of getting employees to work harder as will earn more money
• Problems
  • Staff concentrate on quantity not quality
  • Firms output influenced by workers needs rather than customer demands
• Performance Related Pay - PRP
  • Bonus/Salary increase usually awarded for above average performance
  • Normally employed when Piecework systems not appropriate
  • Managers favour PRP because they see it as means of providing incentive for staff to improve
• Advantages
  • Direct link between pay and effort
  • May lead to reduction in costs
  • Higher motivation can lead to lower labour turnover
  • Useful for appraisals - Individual targets to work towards
• Disadvantages
  • Cause of conflict if different staff receiving different bonuses
  • Motivation effect is debatable - PRP very small proportion of salary
  • Difficult to measure performance in some occupations
• Profit Sharing - Profit related bonus
  • Proportion of firms profit divided among employees in form of a bonus
• Advantages
  • Reduces problem of them and us between employees and…