Employee motivation,incentives and fringe benefits
Motivation is defined as an innate need or
desire with a physiological or psychological
basis that propels an individual to undertake an
activity to satisfy the need or desire.
1. Awareness on the part of the individual that a
need is operating.
2. Identifying mechanisms to satisfy the need.
3. Drive mechanism implementation.
4. Attainment of goals.
Functions of Work:
Work is instrumental for
Contributes to personal
Provides opportunities for
interaction with others.
Status and self-respect.
Growth and Development.
Relate to and contribute
Chris Argyris’ Immaturity-Maturity Theory:
• Capable of behaving in
• Shallow interest
• Short-term perspective
• Subordinate position
• Lack of Self-Awareness
• Capable of behaving in
• Deep interest
• Long-term perspective
• Super ordinate position
• Self-Awareness and
Content Theories of Work
These theories attempt to determine
what motivates people at work and
are concerned with identifying and
Maslow’s need-hierarchy theory
Herzberg’s Two-Factor theory
Alderfer’s ERG theory
McClelland’s Achievement motivation
Maslow’s Model in a work situation
Herzberg’s Two-Factor Theory
Company policy and
Alderfer’s ERG Theory
ERG stands for Existence, Relatedness and
It is a more practical theory compared to
Maslow’s Theory as it explains individual
differences in pursuit of development
regardless of whether or not other needs are
satisfied. But the main drawback is we are not
sure as to what motivates an individual.
McClelland’s Achievement Motive Theory
A brief description is as follows:
Need for Achievement
Need for Power
Need for Affiliation
Process theories of Work Motivation
•Vroom’s Expectancy Model
•Adam’s Equity Theory
•Porter-Lawler’s performance-satisfaction Model
Incentives are the rewards to an employee, over
and above his base wage or salary, in
recognition of his performance and contribution.
“ An incentive scheme is a plan or programmes to
motivate individual or group performance. An
incentive programme is most frequently built on
monetary rewards but may also include a variety
of non-monetary rewards or prizes.”
By- Burack and
Effective Incentive System
Incentive plan should be simple so that it may be
easily understood by the workers.
The plans should be acceptable to the workers,
trade unions and management.
The incentives rates should be made attractive
so as to encourage the worker to give his best
All incentives should guarantee a minimum day’s
The scheme should be explained and
discussed with all employees and
supervisors before it is implemented.
Standards once fixed should not be changed
unless it is necessary.
Two Types Of Incentives
1. Financial Incentives
2. Non-Financial Incentives
Group Incentive/ Bonus Plan
It is a plan in which a production standard is
set for a specific work group and its
members are paid incentives if the group
exceeds the production standard.
It is an incentive plan that engages many
or all employees in a common effort to
achieve a company’s productivity and
any resulting incremental cost-savings
gains are shared among employees and
At-Risky Pay plan
These are some times called variable pay
plans but are essentially plans that put
some portion of the employee’s pay at risk,
subject to the firm’s meeting its financial
Salary plan varies from organization to
organization. Some firms pay sales
people fixed salaries and no specific
commission or bonus schemes are paid
on achieving the sales targets. The
emphasis being on customer service
rather on high pressure selling.
Commission plans provide
sales representatives with
payment based on a
percentage of sales turnovers
Most companies pay their
salespeople a combination
of salary and commission. A
portion of total earnings is
paid in form of fixed salary.
Bonus Scheme And
Bonus scheme provide pay in
addition to basic salary which is
related to the achievement of
defined and preferably agreed
targets. These may refer simply
to sales volume or profit.
Decisions on the base salary of
directors and senior executives are
usually formed on the basis of
market worth of the individuals.
company is usually settled by
negotiation, often subject to the
The Annual Bonus
Annual bonus plans are those
which are aimed at motivating
the short term performance of
their managers and executives
and are given on the basis of
the profitability of the company.
A stock option is the right
purchase a specific number
shares of company stock at
specific price during a period
Book Value Plan
Managers are permitted to
purchase stock at current book
value. Executives can earn
dividend on the stock they own,
as the company grows the book
value of their shares may grow
The employee is given the
appreciation in the value of
shares from the date the option
was granted till the date it was
relinquished. He earns without
investing any money in buying the
Restricted Stock Plans
Shares are usually awarded
without cost to the executive
but with certain restrictions.
One of the major restrictions is
that the shares may be forfeited
if they are not earned out over
a specified period of time.
Executives receive not shares but
“units” that are similar to shares of
company stock. Then at
some future time they receive
value equal to the appreciation of
the “phantom” stock they own.
Employee Stock Option
A company contributes shares of its
own stock or cash to be used to
purchase such stock to a trust.
The trust holds the stock in
individual employee accounts and
distributes it to employees upon
their retirement or at the time of
separation from service.
Employee Stock Purchase
The employees are given the right
to acquire shares of the company,
normally at a price lower than the
prevailing market price.
“Imagine life as a game in which you are juggling some five balls
in the air. You name them - work, family, health, friends and
spirit - and you're keeping all of these in the air. You will soon
understand that work is a rubber ball. If you drop it, it will
bounce back. But the other four balls - family, health, friends
and spirit - are made of glass. If you drop one of these, they
will be irrevocably scuffed, marked, nicked, damaged or even
shattered. They will never be the same. You must
understand that and strive for balance in your life.”
-Brian G. Dyson
President and CEO
Fringe benefits are those monetary
and non monetary benefits given to
the employee during and postemployment
connected with employment but not to
the employees contribution to the
You Could receive a benefit when you
Use a work car for private purposes.
Are provided with a cheap loan.
Are provided with free private health insurance.
Are provided with cleaning services for your private
residence or enter in to a salary sacrifice arrangement.
Need & Importance of Fringe
• To retain the employees.
• To motivate performance.
• As a social security.
• Trade Union demand.
• Skill shortage.
• Employee Demand.
Principles of Fringe
Satisfaction of Real Needs.
Educate the workers.
Fringe Benefits In India :
Payment for Time not Worked.
Payment For Special Duties.
Payment For Health and Security Benefits.
• Basically, a fringe benefit is a benefit
provided to an employee or an associate (For
Example: Family, Spouse and children)
because of his employment.
• Fringe Benefits provide output in terms of
employee loyalty and co-operation, employee
welfare and create Organizational image.
1.Ajai Kumar Singhal,“Human
2.Gary Dessler & Biju
Varkkey, “Human Resource