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Business Studies

Financial and non-Financial Rewards


Learning Objectives:
To understand the various ways
that workers that workers can be
financially and non-financially
rewarded
To discuss, compare and evaluate
different reward systems in
different business contexts

Business Studies
Financial and non-Financial Rewards
Make a list of the different ways that people can
be financially rewarded (paid) for the work that
they do?
Is one method of financially rewarding (paying)
for the work an employee does better than
another?
Why?

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be financially
rewarded for their work?
WAGES
Reward for a regular amount of time a worker
spends at work for example weekly wages
Wages are not linked to the level of productivity
Wages guarantee the income for the worker but do not
offer a financial incentive to work harder.
Extra hours worked can be paid as overtime

Business Studies
Financial and non-Financial Rewards

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be financially
rewarded for their work?
1. TIME RATES
Reward for the amount of time a worker spends at
work eg. an hourly rate
Time rates are not linked to the level of productivity.
Used where ir is difficult to measure the output of a
worker
Time rates guarantee the income for the worker but do
not offer a financial incentive to work harder.

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be financially
rewarded for their work?
2. PIECE RATES
Workers are paid an agreed rate for every item
produced (this is payment by results system)
Piece rates are linked to productivity and provide a
financial incentive to worker harder and produce
more.
Targets are often set for workers to try to achieve.

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be financially
rewarded for their work?
SALARIES
Normally paid monthly, based on an annual
amount divided into 12 payments
Usually a standard rate and no extra is paid for
overtime.
Can be linked to rewards such as commission, bonus
and profit-sharing

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be
financially rewarded for their work?
COMMISSION
Workers are paid a percentage of the value of the
goods or service provided
Some workers on commission also receive a
guaranteed base salary. The commission then
becomes an incentive earn more money.
Eg. Real estate salesperson

Business Studies
Financial and non-Financial Rewards

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be
financially rewarded for their work?
PROFIT-SHARING
In addition to a basic salary, workers receive a
share of the annual profits of the company
BONUS
A lump sum paid to workers if they have done a
good job

Business Studies
Financial and non-Financial Rewards

Business Studies
Financial and non-Financial Rewards
What are the different ways that workers can be
financially rewarded for their work?
FEES
Fees are a payment made to person for a specific
task the amount of the fee may depend on the
time taken or the level of difficulty
Fees are usually paid to service providers.
Eg. Solicitors

Business Studies
Financial and non-Financial Rewards
Should one employee be paid more than another if they
are doing a similar job?
PERFORMANCE RELATED PAY
This is an incentive scheme that links the annual
salary of an employee to their performance in the
job.

The best employees receive the highest


financial reward salary, bonus, profit-share

Business Studies
Financial and non-Financial Rewards
PERFORMANCE RELATED PAY:
A method of payment where an individual employee receives an
increase in pay based wholly or partly on the regular and systematic
assessment of individual performance. The payment of salary
increments, bonus and other incentives is determined by a process of
systematic performance appraisal . The performance measures may
concern inputs or outputs but generally focus on the achievement of
specific individual objectives. There has been a growth of interest in
such schemes.
How do you accurately measure performance?
What could be some of the problems with this type of financial
incentive scheme?

Business Studies
Financial and non-Financial Rewards

Business Studies
Financial and non-Financial Rewards
PERFORMANCE RELATED PAY:
A number of organizations have experienced difficulties in setting
performance criteria, assessing performance objectively and in linking
pay to performance, particularly where budget constraints limit the
potential size of any reward. Individual performance related pay
systems have also been found to undermine team working . Some
organizations have abandoned or modified their PRP systems but
others are still moving towards this approach to pay .

Business Studies
Financial and non-Financial Rewards
Performance
related pay

Commission

Bonus

METHODS OF PAYMENT

Wages

Salaries

Time rate
Piece rate

Profit-sharing

Business Studies
Non-Financial Rewards
JOB SATISFACTION
can be increased by

Job Rotation

Job Enrichment
Job Enlargement

What do we understand by:


Job Rotation
Job Enlargement
Job Enrichment