Payment Systems (SQA National 5 Business Management): Revision Note

Financial rewards for work

• Financial rewards are payments made to employees in return for their work

  • They are an important part of motivation, helping to attract, retain and reward employees

Examples of financial rewards

1. Salaries

• A salary is a fixed amount of money paid to an employee each year, usually split into monthly payments

  • It does not normally change with the number of hours worked

• Salaries are common for managers, professionals, and full-time office staff.

  • E.g. A marketing manager earns a salary of £36,000 per year, paid monthly (£3,000 per month)

2. Wages

• Wages are paid based on the amount of work done, usually weekly.

• They are common in jobs where hours or output can change from week to week, such as retail or construction

• Wages can be paid as a time rate or as a piece rate

3. Overtime pay

• Overtime pay is an extra payment for hours worked beyond normal working time

• Overtime is often paid at a higher rate, such as 'time and a half' or 'double time'

  • E.g. A worker earning £10 per hour receives £15 per hour for overtime hours completed

• Overtime encourages flexibility when demand is high and rewards employees for their extra effort

4. Commission

• Commission is a payment based on the value or number of sales an employee makes

• Employees may earn a basic wage plus commission, motivating them to sell more

• It is common in retail, estate agency and car sales

  • E.g. A salesperson earns 5% commission on every £1,000 sold, plus a basic wage

5. Bonuses

• A bonus is an extra payment or reward for good performance

  • It may be given to individuals, teams or all staff if company targets are achieved

• Bonuses are used to reward hard work and encourage continued effort

  • E.g. An employee receives a £500 bonus for exceeding their sales target in a particular month