What is meant by ‘Monetary Incentives’? State any five types of monetary incentives which contribute to the performance of employees.

Meaning: Monetary/Financial incentives are those incentives which are evaluated in terms of money.

Types: Following are the important types of monetary incentives:

(i) Pay and Allowances: Pay and allowances are the chief monetary incentives for every employee. Salary includes basic pay and dearness allowance alongwith other allowances. The employees remain motivated with the annual increment in pay and allowances.

(ii) Productivity Linked Wage Incentive: The employees can be motivated by linking productivity with their salary. In other words, the increment in salary will be in direct proportion of increase in productivity.

(iii) Bonus: Bonus refers to that payment to employees in addition to their regular remuneration which is paid as a reward of their good services. The bonus plan helps in establishing cordial relations between owners and employees. These days, the payment of bonus to employees is prevalent in almost all industries. The payment of bonus may be in cash or kind. For example, an employee can be given cash reward or sent abroad in recognition of his/her services.

(iv) Retirement Benefits: Every employee remains concerned about his future after retirement. If he is offered financial security for his post-retirement period, his future will be secured. This situation will certainly motivate him. Provident Fund and Gratuity are the best examples of post-retirement benefit.

(v) Perquisites: Perquisities are those facilities which an employee gets free from the employer e.g., rent free accommodation, car, facility of a servant, etc. These facilities play an important role in motivating the employees.