Q&A - What are the main methods of financial reward?
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There is a wide variety of ways in which a business can offer money (or “financial rewards”) as part of the “pay package”, including:
• Salaries: fixed amounts per month or year for performing a role; these are common for most managerial positions (e.g. Accountant, Payroll Manager)
• Benefits in kind (“fringe benefits”) – very common in businesses of all kinds; these include staff discounts, contributions to travel costs, staff uniforms etc
• Time-rate pay: pay based on time worked; very common in small businesses where employees are paid per hour.
• Piece-rate pay: pay per item produced – becoming less common
• Commission: payment based on the value of sales achieved. This is common in the pay packages of employees who are targeted with generating business & revenue (e.g. a salesman might be paid a mixture of a low basic salary and tiered commission depending on whether his/her sales targets are achieved)
• Other performance-related pay: e.g. bonuses for achieving targets
• Shares and options: less common in small businesses, but popular in businesses whose shares are traded on stock markets
• Pensions – becoming less common and generous. Small businesses tend not to offer pension benefits.
In most cases, an employee might expect to have a mixture of the above in a pay package.
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