Types of Financial Rewards (DP IB Business Management): Revision Note

Employees are paid according to the number of units or pieces they produce

Commonly used in manufacturing or assembly-line settings and encourages workers to increase their output, e.g. garment factories in Bangladesh use this

Taylor's Scientific management

A percentage of sales revenue paid to workers who sell products or services

Commonly used in sales roles and motivates staff to increase their sales revenue

Hygiene factor in Hertzberg's Theory

Connects to Esteem Needs in Maslow's Hierarchy (salesperson of the month)

An additional payment is given to staff as a reward for achieving specific goals, completing projects on time, or exceeding performance expectations

Motivates staff to work harder and achieve better results

Connects to Esteem Needs in Maslow's Hierarchy (achievement)

Herzberg believed that bonuses as the main form of payment would negatively influence individual behaviour in the workplace (this was part of the problem in the banking industry leading up to the 2008 financial crash)

A portion of the company's profits are distributed among staff

This encourages them to think like owners, work collaboratively and focus on the company's overall goals

Motivator in Herzberg's Theory as it creates buy in to increased responsibility (help the organisation succeed; be an owner) 

Staff are paid based on their performance which (theoretically) motivates staff to work harder and achieve better results

This form of payment has been severely criticised as discriminatory and open to abuse by managers

Hygiene Factor in Herzberg's theory - and has been proven to cause significant dissatisfaction when utilised

Financial rewards received by employees other than wages or salary, such as medical insurance, a company vehicle or private pension plan 

Fringe benefits may link to ego needs in Maslow's hierarchy of needs, especially if they are linked to employees' position in the organisational hierarchy

Wages are usually paid to workers on the basis of hours worked (time rate) or items produced (piece rate)

Salaries are expressed on an annual basis and workers are paid a proportion on a periodic basis (usually each month)

Connects to safety needs in Maslow's hierarchy of needs and acts as a hygiene factor in Hertzberg's two-factor theory

Equitable and sufficient pay is required to avoid staff dissatisfaction and retain workers