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Question
State any two financial incentives.
Solution
The financial incentives generally used in organizations are listed below:
- Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance, and other allowances. The salary system consists of regular increments in the pay every year and enhancement of allowances from time to time. In some business organizations, pay hikes and increments may be linked to performance.
- Productivity-linked wage incentives: Several wage incentive plans aim at linking the payment of wages to increase productivity at the individual or group level.
- Bonus: Bonus is an incentive offered over and above the wages/salary to the employees.
- Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organization. This serves to motivate the employees to improve their performance and contribute to increasing profits.
- Co-partnership/Stock option: Under these incentive schemes, employees are offered company shares at a set price that is lower than the market price. Sometimes, management may allot shares in line with various incentives payable in cash. The allotment of shares creates a feeling of ownership in the employees and makes them to contribute the growth of the organization. In Infosys, the scheme of stock options has been implemented as a part of managerial compensation.
- Retirement Benefits: Several retirement benefits such as provident fund, pension, and gratuity provide financial security to employees after their retirement. This acts as an incentive when they are in service in the organization.
- Perquisites: In many companies, perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education to the children, etc., over and above the salary. These measures help to provide motivation to the employees/managers.
Notes
Students can refer to any two points from the above solution.
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