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Financial methods of motivating and empowering employees

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Introduction

Financial methods of motivating and empowering employees Financial motivation consists of motivating and empowering employees with methods that require a cost to the business. Most businesses see the need for financial motivation. The main methods are explained below. Performance related pay Performance-related pay is a financial reward to employees whose work is either considered to have reached a required standard, and/or is above average. Performance related pay is used in two different ways in business. Either, individual performance is reviewed regularly (usually once per year) against agreed objectives or performance standards. Or at the end of the appraisal, employees are categorised into performance groups - which determine what the reward will be (if any). The method of reward will change, but usually it involves a cash bonus and/or an increase in wage rate or salary. "Performance-related pay has grown widely in recent years - particularly in the public sector. This is part of a movement towards rewarding individual performance which reflects individual circumstances." - http://tutor2u.net/business/motivation_financial The advantages of performance related pay to the business are that it provides an incentive for employees to achieve defined work targets, as employees are more likely to focus on what they need to do to improve if this is directly linked to pay. This method is also good at dealing with poor performance employees and can push them to work harder. The advantages of performance related pay to the employees are that the contribution that the employees make is recognised and is rewarded usually with a cash bonus. This gives the high achievers to benefit from their hard work. ...read more.

Middle

The advantages of time rate to the employee would be that the employee is able to budget his or her personal finance within a good degree of accuracy. It is also very easy to understand for the employee as they will usually get the same pay each week or month. Another advantage is that employees have the option to work overtime at a higher hourly pay. "However, many employees who are paid a monthly salary do not get paid overtime. This is usually the case for managerial positions where it is generally accepted that the hours worked need to be sufficient to fulfil the role required." - http://tutor2u.net/business/people/motivation_financial_timerate.asp The advantages of time rate to the employee would be that it is relatively simple to calculate which in turn, keeps administration costs down. It is not dependant on calculating each employee's productivity and figuring a wage from that. Employees may be more motivated to work longer hours if they are getting paid for that. The disadvantages of time rate to the employee is that it doesn't do much to motivate, there is no incentive to do better, only to work longer. The disadvantages of time rate to the employer are that employees are only required to work longer in order to acquire more money; it doesn't look specifically at effort or goals etc. I believe that time rate is not very motivating in terms of financial methods of motivation. It is the most commonly used method of payment in the UK, I believe this is down to ease. It doesn't put emphasis on working harder or working towards a goal. ...read more.

Conclusion

I believe that profit sharing is a very effective method of financial motivation. It gives employees a reward for their hard work and efforts. Employees can directly see when the business does well due to their hard work as they receive a higher income. An employee who is well taken care of will perform better. His or her motivation to work will be higher. Profit related pay Profit related pay is a kind of pay that is directly related to the profits of the company. The advantage to the employee is that if the company does well and makes a high profit, the employees receive a higher salary. The advantage to the employer of profit related pay is that the employees would be motivated to work hard and see the business do well as they want to stay in reasonable comfort in terms of a wage. The disadvantage to the employee is that if the companies' profits decrease or if they lose money, then the employee would suffer because of this by receiving a decrease in pay. The disadvantage to the employer is that certain businesses can be susceptible to changes in the economy. If the business doesn't do well regardless of hard work, this can be de-motivating for the employees as they are receiving a lower wage even though they are working to the best of their ability. I believe that profit related pay is an okay method of financial motivation. It could put many employees off due to the stress with this method of payment. It is very uncertain and difficult to estimate. ?? ?? ?? ?? Andrew Sinnott - Unit 20 - task 3 ...read more.

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