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Compensation Strategy Monetary & Non-Monetary Rewards

The motivational factors that motivate a person to work and which can be used to enhance their performance can be classified into two categories—monetary factors and non-monetary factors.


Monetary Factors:

1. Salary or wages:

This is one of the most important motivational factors in an organization. Sala­ries and wages should be fixed reasonably and paid on time.

2. Bonus:

Bonus is an extra payment over and above salary, and it acts as an incentive to perform better. It is linked to the profitability and productivity of the organization.

3. Financial incentives:

The organization provides additional incentives to their employees such as medical allowance, travelling allowance, house rent allowance, hard duty allowance and children educational allowance.

4. Promotion (monetary part):

Promotion is attached with increase in pay, and this motivates the employee to perform better.

5. Profit sharing:

This is an arrangement by which organizations distribute compensation based on some established formula designed around the company’s profitability.

6. Stock option:

This is a system by which the employee receives shares on a preferential basis which results in financial benefits to the employees.

Non-monetary Factors:

1. Status:

An employee is motivated by better status and designation. Organizations should offer job titles that convey the importance of the position.

2. Appreciation and recognition:

Employees must be appreciated and reasonably compensated for all their achievements and contributions.

3. Work-life balance:

Employees should be in a position to balance the two important segments of their life—work and life. This balance makes them ensure the quality of work and life. A balanced employee is a motivated employee.

4. Delegation:

Delegation of authority promotes dedication and commitment among employees. Employees are satisfied that their employer has faith in them and this motivates them to perform better.

5. Working conditions:

Healthy working conditions such as proper ventilation, proper lighting and proper sanitation improve the work performance of employees.

6. Job enrichment:

This provides employees more challenging tasks and responsibilities. The job of the employee becomes more meaningful and satisfying.

7. Job security:

This promotes employee involvement and better performance. An employee should not be kept on a temporary basis for a long period.

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