MU0015 [Compensation Benefits] Set2 Q4

Q4. What are examples non-financial incentives?

Ans:

In employment, it is a reward to a worker other than extra pay. Many non-financial rewards are bonus such as company cars, free private medical care, and free pension entitlement. However, an employee may be rewarded, for example, by being given a better office or a bigger budget to control, or by being given the choice of where to take a posting in a company. Non-financial rewards can be very cost-effective for companies because, in contrast with a pay increase, little or no income tax or national insurance contributions are paid.

In this study, we assess the impact of organizational determinants on the motivational process, specifically of HRM tools and non-financial incentives as part thereof. We define an incentive as an available means applied with the intention to influence the willingness of physicians and nurses to exert and maintain an effort towards attaining organizational goals. This is borrowed from Buchan et al., who define an incentive as "one particular form of payment that is intended to achieve some specific change in behaviour" (Buchan quoted in Adams and Hicks.

The most common understanding of financial incentives is a transfer of monetary values or equivalents, such as wage increases, allowances, performance-related bonuses or housing. Adams/Hicks also include the basic salary, allowance schemes, health insurance premiums, housing or housing allowances in this category. Obviously, in practice it may be difficult to differentiate between the basic salary package and additional financial incentives. Non-financial incentives are by contrast those incentives that involve no direct transfers of monetary values or equivalents to an individual or group. This includes, for example, granting unpaid holidays, token awards or recreational facilities, as well as recognition and supervision.

Human resources management (HRM) is the management of people in an organization. HRM tools comprise the policies, practices and activities at the disposal of managers to obtain, develop, use, evaluate, maintain and retain the appropriate number, skill mix and motivation of employees to accomplish the organisation's objectives. There is a huge body of literature on HRM and tools, which cannot be captured here. But as the commentary on "what difference does ("good") HRM make?" by Buchan [20] shows, good HRM determines performance and motivation. In other words, tools and techniques applied as part of HRM also function as non-financial incentives to strengthen motivation in line with the above definition. The following list, derived from EFQM (European Foundation of Quality Management) criteria, contains some of the core HRM tools that may affect motivation. 

• supervision schemes
• recognition schemes
• performance management
• training and professional development
• leadership
• participation mechanisms
• intra-organizational communication processes.

The organizational culture influences all these aspects, but changes in these aspects may also modify the organizational culture. Furthermore, as outlined in Figure 1, work conditions constitute an important motivational determinant. Comprehensive HRM therefore also needs to look at and optimize the work conditions.

Non financial rewards outcome

• Non-financial Programs incentive and reward programs structured to motivate positive behavior change through means other than money (i.e. “Publicizing, Performance”, “Providing Additional Technical Support”)
• Motivate and retain employees (A motivated employee will achieve a great deal. A demotivated employee wills be slow, horizontal to error and not likely to achieve).
• Helps to build feelings of confidence and satisfaction in employees
• Can be very important for their long-term effect.
• It refers to non-monetary benefits to staff provided in recognition of their performance.

The following are some of the examples of non financial incentives:
i) Job security: The Management must strive to create s sense of job security in the organisation.  It has been observed that the productivity in organisations where there is job security is higher than the organisation where there is no job security.

ii) Recognition: The management must recognise people for a job well done.  Efficient people and people who deserve recognition would naturally want that kind of an appreciation from the management.  The technique to raise good work must be well chosen.

iii) Participation: The management must encourage employee participation in enterprise related affairs.  This would make the employees feel wanted and their co operation would increase

iv) Assigning responsibility: When the management assigns certain rights and responsibilities to employees to execute a given task, the employees are motivated to perform better.  When the management assigns responsibilities to an employee, it shows that the management trusts the employee and it encourages the employee to produce better results.

v) Facilities for development: The management must provide facilities for the employees to further develop their skills.  Proper training must be provided to assist them in their job.  This motivates the employees to a great extent.

vi) Labour welfare services: The management must attend to the needs of employees.  It must provide a good working environment to the employees.  This can be done by having a good infrastructure, providing employees with proper systems and so on.