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Methods of Motivation

Exam code: 7115
Written by: Ashika|Reviewed by: Caroline Carroll|Updated 2 July 2026

Financial methods of motivation

Financial methods of motivation

  • Financial incentives are rewards or payments given to employees in return for their labour or improved performance

  • The different theories of human motivation offer varying perspectives on the role of money in motivating staff

    • Herzberg's theory says that money is not generally a motivator, but the lack of it leads to dissatisfaction

    • Maslow's theory suggests people move through levels of needs that motivate them

      • Lower-order needs are closely linked to financial rewards, whilst higher-order needs are rarely linked to pay

      • Physiological and safety needs can be partially met by providing adequate pay 

      • Love and Belonging needs are often met by encouraging aspects such as teamwork

Financial methods of motivation

Diagram showing financial motivators: time-based, salary, price rate pay, commission, bonuses, profit sharing, fringe benefits.
Financial incentives motivate some employees, depending upon the importance that they place on monetary items/money as a reward

Incentive type

Explanation

Time based

  • This refers to the basic wage or salary that a worker receives for their labour

  • Employees who work on an hourly rate are paid wages and accrue benefits such as annual leave according to the hours they work

Salary

  • Salaries are paid to full-time staff and usually accompanied by benefits such as a fixed number of days of annual leave

Piece rate pay

  • Some workers may be paid a piece rate according to how many items they produce or sell

Commission

  • A percentage of sales revenue is paid to workers who sell products or services

  • Commonly used in sales roles and motivates staff to sell more and upsell

Bonus

  • An additional payment given to staff awarded for achieving specific goals, completing projects on time or exceeding performance targets

  • The opportunity to earn more money may motivate staff to work harder and achieve better results

Profit sharing

  • A financial reward where employees receive a share of the business’s profits, often given as an annual payment in addition to their regular salary

  • Knowing they will benefit directly from the business’s success may encourage staff to work harder, improve performance and stay loyal to the firm

Fringe benefits

  • These are additional benefits usually offered to salaried employees

    • Fringe benefits could include the use of a company car, private healthcare or gym membership

    • Employees can be motivated to work hard in order to keep their job and the associated fringe benefits

Non-financial methods of motivation

Non-financial methods of motivation

  • Non-financial incentives are rewards that are not directly related to money

  • These incentives may be intangible and include methods that lead to recognition, praise, job satisfaction or improved work-life balance

Types of non-financial Incentives

  1. Praise/employee of the month

    • Many workers respond well to praise or to recognition programs inside the workplace.

    • Meaningful praise can increase productivity

  2. Job enrichment

    • Involves adding more challenging or meaningful tasks to a job

    •  Staff feel more motivated and engaged, leading to improved productivity

  3. Job rotation

    • Involves moving staff between broadly similar but varied roles in the business

    • Exposes staff to new challenges and experiences, which can increase motivation, understanding and skill

  4. Teamworking

    • Teamwork may involve workers completing tasks together

    • Teamwork can increase motivation in the workplace, as each member of staff has a role and a shared goal

  5. Training

    • Involves staff improving or learning new skills and abilities

    • This can make employees feel valued, more productive and likely to remain with the business

  6. Promotion opportunities

    • Employees offered promotion will feel recognised, have a higher status and will be given more challenging tasks/responsibilities to perform 

    • These benefits are closely linked to the views of both Maslow and Herzberg

Recommending motivation methods

Recommending motivation methods

  • When recommending a method of motivation for employees in a business, managers must recognise that individuals are motivated in different ways

Factors affecting the choice of motivation method

  • The context of the business

    • What type of business is it? E.g. manufacturing or sales 

    • The budget available 

    • How many workers does the organisation have?

    • Does the business currently use any methods of motivation?

    • What is the nature of the work carried out by employees on a daily basis?

  • The balance of the compensation package

    • Ideally it should include both financial and non-financial 

    • It should be adaptable and reflect the changing needs of staff

Recommending a method of motivation

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