Retaining Workforce - Financial Incentives

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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…


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