Impact OF Financial AND NON-Financial Rewards ON Employee Motivation

 

Blog 01

Impact OF Financial AND NON-Financial Rewards ON Employee Motivation

It is widely debated that the pivotal function of Human resource management is to implement practices that enhance the satisfaction of employees with their jobs. Employees expect financial and non-financial rewards for their services and efforts. In the absence of equitable pay, training, and development opportunities and recognition, employees get dissatisfied and do not perform to the standards. The dissatisfaction resulting from the unavailability of financial and non-financial rewards usually leads to high employee turnover and poor performance. The benefits that employee foresee for themselves and their families motivates the employees to give their best (Shoemaker, 2020). The Rewards are categorized into two groups financial and non-financial rewards. The financial rewards are also called extrinsic rewards and non-financial rewards are called intrinsic rewards. The financial rewards include pay, bonuses, allowances, insurance, incentives, promotions, and job security, whereas the non-financial rewards include. Appreciation, meeting new challenges, a caring attitude from the employer, appreciation, and recognition motivate the employee (Amit, 2020).

Employee reward systems refer to programs set up by a company to reward performance and motivate employees on individual and/or group levels. They are normally considered separate from salary but may be monetary in nature or otherwise have a cost to the company. While previously considered the domain of large companies, small businesses have also begun employing them as a tool to lure top employees in a competitive job market as well as to increase employee performance (Anderson, 2021). Rewards can play a significant role in influencing employees' attitudes and perceptions of work. Owing to the fact that rewards represent anything that is valuable and meaningful to the recipient, skilled and talented employees are less likely to be motivated by rewards that are not aligned with their preferences and values. The main reason reward management exists in business organizations is to motivate the employees in that particular organization to work hard and try their best to achieve the goals which are set out by the business typically encompasses not only traditional, quantifiable elements like salary, valuable pay, and benefits, but also more intangible non-cash elements such as scope to achieve and exercise responsibility, career opportunities, learning and development, the intrinsic motivation provided by the work itself and the quality of working life provided by the organization. Reward management in a business organization deals with the design, implementation, and maintenance of reward practices that are geared toward the improvement of the business organization's performance (Arthur, 2022).

The word motivation is derived from the word mover which means to move though this could be not enough to describe for what it meant. Motivation is the force that convinces employees to behave and perform in a way that leads to reward. As a result, they expect that they are rewarded with all those reimbursements that they anticipate for themselves and their families in return for their services and efforts. Motivation is defined as the state that compels an individual to proceed in a way planned to accomplish some goals. The essence of human resource management practices is to enhance the motivation of employees. Employee motivation enhances job involvement and job satisfaction of an employee (Barney, 2020). According to research, there are certain cross-disciplinary indicators like commitment, contentment, loyalty, and intention to quit which measure the motivation of an employee. The motive that directs the employee towards certain behavior is called employee motivation. It can be the desire to accomplish a goal or acquire a state of being (Ware, 2022). Motivation is the extent of enthusiasm, direction, and persistence of efforts with which the employee tries to accomplish goals. It is the readiness to exert efforts with passion conditioned by their need satisfaction. It implies that the employee is eager to work to the best of their abilities only if they are ensuring for their need satisfaction. The effectiveness of an organization is greater than before when it has a motivated workforce. The reason behind this is that employees who are motivated are more productive for organizational excellence. The more motivated an employee is, the better he will perform his job. The motivated workforce is more quality oriented and dedicated to accomplishing goals (Arthur, 2022). Companies can gain a competitive advantage over other firms by motivating and retaining human resources, Organization motivates the high performers by providing financial and non-financial reward systems which motivate the employees and enhance job satisfaction. Financial and non-financial rewards have a strong influence on employee motivation and are directly related to performance. The significance of financial and non-financial rewards varies with age. The non-financial rewards influence motivation to a greater extent after the pay exceeds a certain level (Amit, 2020).

Non-financial rewards otherwise known as intrinsic rewards are the job's inherent and intangible rewards included in the job itself such as job tasks, challenging and interesting jobs, and training possibilities offered to the employees. Non-financial rewards do not enhance the employee's financial position directly but make the job more attractive. Some of the Non-financial rewards that a business organization offers might include an attractive pension scheme, access to private medical care, help with long-term sickness, crèche facilities, counseling services, staff restaurant, etc. (Ware, 2022). Non-financial rewards can have an even more substantial impact on employee satisfaction and motivation than traditional financial rewards. A study by the Hay Group involving around four million employees found that employees listed work climate, career development, recognition, and other non-financial issues as key reasons for leaving a job. Even well-compensated employees may leave a company if dissatisfied with these aspects. Companies with excellent non-financial incentive plans can attract motivate and retain talented people (Amit, 2020).

Financial rewards otherwise known as extrinsic rewards are non-job related rewards such as pay, salary, and work conditions. Gupta and Shaw (2018) concluded in their research that financial incentives are indeed effective. They took the point of view that not all jobs are Interesting and challenging in nature, if we would live in an ideal world everyone would be intrinsically motivated and rewarded, but in many workplaces, this is not the reality. They concluded that money matters to most of us and it motivates us because of the symbolic and instrumental value it bears (Barney, 2020). The symbolic value of money recaps what we ourselves and what others think about it, the instrumental value of money means the ends we can get for exchanging it. Financial rewards are those that will enhance the employee's financial well-being directly e.g. bonus, an increase in wages, and profit-sharing schemes i.e. pay bonuses, fringe benefits, transportation facilities, medical facilities, health and life insurance, and benefits like vacation with pay meal facilities (Ware, 2022).

 

Conclusion

In summary, what can be concluded is that both financial and non-financial rewards have an impact on employee motivation. The impact which rewards have on motivation can be reinforcing or hinder one’s motivation. It is considered that the National Revenue Authority has well managed to reward its employees as none of the employees felt that they are not motivated at all. From the findings, the study recommends reward packages must be valuable to the employees and should be based on realistic and reliable standards. The rewards exercised by National Revenue Authority must be clearly identified and should have some meaning for the employees. The reward plan exercised at National Revenue Authority should be made clear to the employees so that they can simply determine personal cost benefits for different levels of effort they put in. The human resource department at National Revenue Authority should consider developing clear policies and rules pertaining to how workers will be paid and the rules for achieving the standards and rewards should be understandable to all employees.

References

Amit, 2020. Strategic Assets and Organizational Rent. Strategic Management Journal, 2(1), pp. 27-39.

Anderson, 2021. Customer satisfaction and price tolerance. International Journal of Human Resource Management, 17(10), pp. 3-24.

Arthur, 2022. Effects of Human Resources Systems on Manufacturing Performance and Turnover. Academy of Management Journal, 3(2), pp. 11-28.

Barney, 2020. Firm Resources and Sustained Competitive Advantage. International Journal of Business Management, 6(3), pp. 78-85.

Shoemaker, 2020. A Comparison of Two Data Collecting Methods: Interviews and Questionnaires. Journal of Human Resource Management, 1(1), pp. 35-45.

Ware, 2022. Impact of supply chain agility on customer satisfaction. International Journal of Management and Economics, 7(3), pp. 36-47.