Financial Methods of Motivation

Business: Cambridge International GCSE (2027 Exams), topic 2.4.2

There are many ways that businesses try to motivate their employees. Often, money is used to achieve this.

Increasing the amount a worker is paid may increase their motivation. The more they get paid, the more workers will value the job, and so the more they will want to keep it and do well for the business.
It can also mean that employees enjoy the work more if there is a higher financial reward. This can also lead to motivation.
However, a salary isn’t linked to an employee’s job performance. This means that an employee will be paid the same regardless of their quality of work and quantity of output.

Commission is paid out as a percentage of the sales that staff make.
It helps to motivate employees to do what the business want to do. If they sell more, they are happy because they earn more money and the business is happy because they make more sales.
Commission is particularly appropriate for roles where individual sales performance can be directly measured.
Such as real-estate agents, car salespeople, or insurance brokers.

Profit sharing is when a company’s profits are divided up between the employees.
The more profit the business make, the more profit the employees make and so they have motivation to try and make the business as profitable as possible.
Huawei is a Chinese phone manufacturing company that has a profit sharing scheme for its employees.

A business that frequently promotes employees and uses internal recruitment is likely to motivate employees to perform well and stay at the business for a longer period of time.
The possibility of getting more opportunity may motivate some employees.
Promotions often lead to salary increases.

Bonuses are similar to commission but they are not just linked to sales.
Bonuses can depend on the quality of the work they employees have done.
Again, employees may be more motivated to act in the way that the business wants.

Employees are paid a fixed amount for each unit they produce.
This method is appropriate for manufacturing or production roles where output is measurable.

Fringe benefits are non-monetary financial motivators.
Such as private healthcare, company cars, or subsidised meals.
These benefits can increase employee satisfaction and loyalty without directly increasing salary costs.

Test yourself on Financial Methods of Motivation

Which of these is not necessarily increased with a higher salary?
Which of these financial motivations are directly linked to an employee's performance?