Unit 4 | Motivation - Financial rewards

Payment	Explanation
Salaries	fixed amounts per year divided into 12 months; these are common for most managerial positions (e.g. Accountant, Payroll Manager).
Wages	payment for work, usually paid by week. So the worker doesn’t have to wait much time to receive money. However, as it has to be calculated per week, it is time consuming and costs money.
Time-rate pay	pay based on time worked; very common in small businesses where employees are paid per hour. It is easy to calculate the worker’s wages and the worker knows exactly what they will get paid for a certain period of time. This system is time-consuming. And also good and bad workers get paid the same amount of money.
Piece-rate pay	pay per item produced – becoming less common. It encourages workers to work faster and produce more goods, as they want to achieve a high income. However, it can make them ignore quality of the product by focusing only on the amount they produce, which makes them produce products that may not sell very well cause of their poor quality.
Commission	Often paid to sales staff. The more sales they make the more money they are paid - similar to piece rate.  Encourages sales staff to sell as many products as possible. This is good for the business as their sales will increase. However, if the sales staff are very persuasive and make the customers buy goods they don’t really want, then the business may see it’s sales increase only in the short term and then fall again as it gets a bad reputation.
Profit sharing	Employees receive a share of the profits in addition to their basic salary. This will motivate the workers to work hard as they all receive a share of the profits earned by the business. The rest of the profits will be paid as dividends to the shareholders or retained by the business.
Bonus	A lump sum paid to workers when they have worked well. It can be paid at the end of the year or at intervals during the year.
Performance-related pay	Employee pay is linked to the effectiveness of their work. Often used where output cannot readily be measured, for example police officers, managers, teachers, etc. A system of Appraisal is often used to assess their performance. Appraisal is where an employee’s immediate superior observes their work, talks to the worker’s colleagues and then carries out an interview with the employee to discuss their progress and effectiveness.