GCSE / Level 2 Revision Notes

People management - Financial methods of motivation

Though there are many reasons why people work for a living, it is undeniable that money, or other financial rewards, play a key role in motivating people in the workplace.

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.
• 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.

How important is money as a motivator?  It is widely accepted that poor or low pay acts as a de-motivator.  Someone who feels undervalued or under-paid may soon leave to find better-paid employment.  However, it is less clear that paying people more results in better motivation. 

For most people, motivation (the will to work) comes from “within”.  More money can help us feel better about out work, but it is unlikely to encourage us to work harder or to a higher standard.