Financial Methods of Motivation

Financial Methods of Motivation



Wages are paid by how much the employee works, such as £10 per hour worked.

Wages are usually used with employees lower down the hierarchy with less authority.

Workers can be penalised for arriving late or calling in sick.

The UK government set the minimum wage that employers must pay.



Salaries are fixed and paid no matter how much the employee works, such as £25,000 per year. For example, a manager could be expected to stay until a job is complete and still receive the same fixed salary.

Piece Rate

Piece Rate

Paid for each unit produced. E.g. a bricklayer could be paid 50p per brick or a toymaker per toy produced.

Workers may be motivated to work harder and produce/ sell more.

However, quality may be reduced as workers rush to be paid more.

Hourly Rate

Hourly Rate

Employees are paid for the number of hours worked.

Employers may pro-rata for less than an hour. E.g. pay exactly 3.5 hours.

The business does not pay out for workers when they are not working.

Workers have less job security as they are only paid for the hours worked often not receiving sick pay

Performance Related Pay

Workers get a bonus based on their efficiency.

It acts as an incentive for workers to meet targets and try harder.

However, can put pressure on staff.

Salespeople are often given higher pay for meeting a certain number of sales or satisfaction rating.


A bonus is an extra payment on top of an employee's base pay (wage or salary).

Bonuses make employees work harder as they can earn more. They also show recognition to the employee.

Bonuses can work out costly for the company, however, could also be non-monetary such as extra holiday leave.


Commission is where staff are paid for the number of items they sell.

This could be a flat fee or a percent of the sales.

For example, car salesmen get a percent for each car they sell.

A disadvantage is that this is a variable cost so increases with each unit

Profit Sharing

Employees receive a percentage of the profit of the business.

Profit = total revenue - total costs.

Employees are more invested as they want to business to do well.

However, the business must give up profit to employees rather than reinvest retained profit to grow the business.