Employee Motivation Through Financial Incentives


Many organisations value people in the workplace as their most important assets. Motivating employees within organisations involves intrinsic and extrinsic approaches. In extrinsic motivation, employees gain tangible benefits like a pay rise, bonuses, and commissions. On the other side, intrinsic motivation mostly involves leadership ranks, positions, and organisational roles and responsibility. Financial motivation is very important since it values and acknowledges the employees’ efforts towards gaining more money, which is conventionally one of the main reasons why people work. For instance, a motor dealership company may realise that its newest car in the market is not selling as expected.

The management decides to meet the sales team and promises to pay an extra one hundred dollars for every unit sold. This scenario is a clear illustration for managers who believe that extrinsic financial rewards promote organisational sales. The salespersons receive extra pay while the company increases its sales to meet the set objectives and goals in sales and revenue (Rose 2008).

Therefore, the employee’s motivation is an important element in every organisation if it has to remain competitive (Dundon & Rollinson 2011). Specifically, financial motivation contributes to organisational productivity and competitiveness. Financial rewards towards the employees’ motivation include pay rise, fringe benefits, time-rate pay, commissions, performance-related pays, and pension schemes. Therefore, managers should mainly focus on financial rewards to motivate employees within organisations. This paper highlights the theoretical debate within the financial employee motivation, provide the previous empirical approach in respect to financial employee motivation, and give analyses of arguments in support of financial employee motivation.

Theoretical debates

Employee satisfaction and motivation in the workplace are linked to increased performance and productivity. The organisation’s management ought to create a self-driven working environment for employees to perform their tasks smoothly (Michael 2010). Different scholars have discussed intrinsic and extrinsic motivations from disparate views and perspectives on employee motivation. Scholars argue differently with respect to the relationship benefits between financial rewards for employee motivation in organisations and their performance and productivity (Kirton & Greene 2005). For instance, intrinsic motivation involves the feeling of belonging to the organisation, pride and prestige of being associated with a globally recognised organisation, and inventing an idea to an organisation among others (Edwards 1986). Extrinsic rewards underscore the benefits that are directly related to financial incentives.

The debate between the intrinsic and extrinsic methods of employee motivation remains unresolved. Some scholars consider only extrinsic rewards, while others differ in support of the intrinsic rewards. Extrinsic rewards like profit sharing, employee stock ownership, subsidised meal arrangements, use of company cars, and childcare programs, among other benefits, are used in different companies towards employee motivation (Armstrong 2012).

According to Salamon (2000), the majority of these rewards by companies, if only directed to employees motivation, amount to just a waste of money. However, the financial incentive, to some extent, stimulates improved job performance to certain individuals. Some scholars argue that there is no guarantee or assurance that financial rewards to employees would ultimately promote the improved performance or increased productivity (Burchill 2008).

Moreover, scholars in contemporary times hold the view that material rewards have short-term motivation outcomes as opposed to intrinsic motivators. Williams and Adam-Smith (2010) argue that studies conducted back in the 1950s showed that employees motivated extrinsically have low job psyche and morale, hence low output. Moreover, Prosek (2011) argues that the traditional management theory based on its employees’ motivation themes on assumptions that workers view work from the perspective of the direct benefits derived. Thereafter, different managerial teams maximised employee motivation through the provision of compensation as an incentive through strict authoritative managements’ regime, which was meant to protect the employees’ behavioural deviation at the workplace. However, after a while, different scholars came up with different model policies committed to creating a humble and conducive environment whereby workers enjoyed and valued work (Cameron & Pierce 2006).

Furthermore, the model focused on the management’s rule over the important work-related decisions, but at the same time making the workplace a friendly environment. In the 1960s, organisations started to acknowledge the importance of human skills, particularly introducing an incentive scheme to tap the employees’ efforts and ideas (Rose 2008). Moreover, this model approach emphasised the use of the employees’ power, responsibility, and self-motivation towards restructuring and moulding the working environment of their choice. This aspect evidently improved the employees’ work performance and achievement of the set targets and objectives was realised (Liff 2011).

However, different research works have concluded that the use of non-monetary motivators can be equally effectual as monetary motivators. According to Tessa and Lynn (2012), monetary systems are infective since employees rely on production to evaluate the expected financial incentives. However, employees do not factor in other factors regarding the productivity of the company. This aspect creates a disparity about financial incentives to be received by the employees; hence, it may demoralise the workforce (Thomas 2007).

In addition, non-monetary motivators promote responsibility, recognition, and individual skill development. Therefore, managers who appreciate the value and recognise the employees’ efforts enhance work performance motivation (Maddock & Fulton 1998). One manager conducted research to establish rewards that fully motivated employees by sampling thirty simple easy-to-fulfil rewards. Specifically, letters of recommendation, a schedule indicating the working time and off time, and the employee’s responsibility in the workplace were found to be the most effective motivators. These factors promoted self-respect and led to sincere praise, which was more cost-effective than monetary rewards.

However, according to Greenwood (2002), of all the employees’ motivators, money serves the best. For instance, the sharing of profits will enhance faster and better productivity, coupled with improving the product quality and performance within an organisation. In this case, the prosperity of the company is the employees’ happiness. Apparently, the benefits of the employer are still the benefits of the employee (Greenwood 2002).

Furthermore, the monetary systems are used in many organisations as a tool to reduce absenteeism, generation of wise ideas, and increase productivity. Therefore, money is effective when used to utilise the employees’ ideas and initiate the spirit of owning and belonging to a company. However, if the monetary reward systems are not combined with the non-monetary systems, the motivating effects on the employees do not last for long (Baldwin 2006). Moreover, if equity and considerable distribution are not exercised to all employees in the monetary systems, the practice can cause more harm than benefits. Scholars argue that the use of one of the reward systems in isolation may not be effective to motivate employees fully and consistently.

Previous empirical research

Employee motivation is a broad term that organisations must know how to tackle productively. Different authors argue in support of the use of non-monetary reward systems towards employee motivation, while others support the use of monetary rewards. However, organisational management has the power and authority to know which policy best fits an organisation. Due to different company management structures and policies towards employee motivation, different organisations use disparate reward approaches. According to Hutton (2010), the monetary reward system only works for a while after which the quality of work performance declines. Moreover, different scholars argue that using a monetary reward system, as the only tool for employee motivation, will ultimately lead to heightened friction in the organisational workplace.

On the contrary, some scholars value the use of money for employee motivation. Every employee aspires for a better living. Therefore, the more money gained from a task accomplishment, the higher the motivation to meet the set organisational targets for higher gains (Mckenna & Beech 2014).

Furthermore, several studies link financial employee motivation and job satisfaction to organisational productivity. This aspect means that a motivated employee will work hard to achieve the set routine goals in search of more monetary rewards (Bratton & Gold 2012). As the employee struggles to meet the organisational objective, the quality and productivity of work improve. Gennard and Judge (2010) argue that the main objective and reason for employees joining any organisation is to make more money and have a luxurious life. Financial incentives provided by organisations are very vital to meeting the employees’ demands for satisfaction and needs. Therefore, the employees’ motivation through financial works better as compared to non-monetary reward systems due to the power and demand for money in the modern global economy (Rose 2008).


Motivating employees means pleasing them to work hard towards organisational goal achievements. Employee motivation through financial motivation is still a debatable issue. However, better and reasonable results can be achieved through financial employee motivation. Several researchers argue that money is one of the scarce resources, and it is the main reason why people seek employment (Greenwood 2002). Therefore, a policy program that aims at providing more or extra financial incentives will highly benefit the organisation if well monitored and managed within the managerial watch.

Furthermore, many researchers recommend that both monetary and non-monetary reward systems can be the most effective methods for employee motivation. Moreover, combining financial and non-financial reward approaches requires equipped and knowledgeable management personnel to incorporate the two systems (Lewis, Thornhill & Saunders 2003). However, the main effective system is monetary rewards, since all workers in employment seek to earn money to meet their livelihood demands. Therefore, if managers can mainly focus on how to reward the employee financially, work performance and productivity would consistently be high.


Financial employee motivation is a very propelling tool for employees to work extra hard for high monetary rewards. Ultimately, the productivity of an organisation will increase if employees are satisfied with their job with respect to monetary gains. Many employees opt to leave some low-paying jobs for high paying jobs solely for monetary reasons. This aspect is a clear indication that employees look for jobs with better and reliable monetary gains. However, there is no guarantee that employees will be motivated for a long time. Therefore, the best approach is to incorporate non-financial methods of employee motivation to the monetary reward system for the best organisation performance.

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