Monetary vs. Non-Monetary Incentives essay

Introduction

The human resource department is one of the main stakeholders of a business. In human resource management, the satisfaction of employees is highly prioritized. It is the key goal of the human resource department to ensure employees’ satisfaction through various methods. For instance, various incentives are implemented to keep the employees focused and motivated. There are two main types of incentives: the monetary and non-monetary ones. Both are rewards to the employees that aim at motivating and encouraging them. Both monetary and non-monetary incentives share some aspects and differ in others. The current paper provides a critical analysis of both monetary and non-monetary incentives by considering factors and characteristics that the two encompass.

Background Information

To start with, monetary incentives are employee motivation methods that aim at rewarding associates for job performance through money (Abdullah & Wan, 2013). The essence beyond the incentives is that some people are easily motivated by money. Monetary incentives give a monetary equivalent to an employee in the form of motivation. This encourages an individual to continue rendering quality services. Many organizations prefer monetary incentives. Monetary incentives mostly affect the salaries and wages of various employees.

 

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On the other hand, the non-monetary incentive methods are alternatives to financial rewards for employees. Due to the varied nature of how different people view money, non-monetary incentives try to balance the situation by rewarding different employees as per their preferences. Non-monetary incentives aim at satisfying the various needs and wants of the employees in an organization. There are various ways of implementing the non-monetary incentives depending on the nature of the employee and the situation in the organization. The various wants of an employee to foster greater engagement and a deeper sense of satisfaction at an organization are taken care of by the non-monetary incentives.

Similarities

The monetary and non-monetary incentives have various similarities which make their application concurrent. To start with, both schemes have a common goal. The two aim at improving the performance of an employee. The monetary incentives motivate the employee by increasing the net income. A similar motivation is achieved through the non-monetary incentives by encouraging the employees and improving their working environment. In addition to that, the two aim at benefiting both the employee and the organization. Monetary incentives improve the welfare of the employee and the quality of service they offer. Non-monetary incentives improve the working environment thus improving the productivity of the employee (Hammermann & Mohnen, 2014). Just like the monetary incentives, the non-monetary motivation schemes are note self-satisfying. The combination of the two is bound to yield favorable results.

Just like the monetary incentives, non-monetary incentives are not self-satisfying. Therefore, the non-monetary motivation schemes tend to compliment the monetary schemes to some point. The converse is also true for monetary schemes. Both suffer various challenges that hinder their perfection. For instance, in non-monetary incentives, slight errors in gifting can cause chaos among the employees. Incorrect naming of gifts may discourage the concerned employee and thus make them feel not recognized by the organization. In addition to that, some employees may have unrealistic expectations of the value of the gift. This may make the respective employee disappointed if the gift does not have perceived value. These are some of the inconsistencies that the monetary incentives do not tend to cause. For effective motivation of employees through non-monetary schemes, some aspects of monetary schemes need to be employed. Also, some employees do not like the public recognition of their capabilities. Being rewarded publicly may disappoint such an employee. At the same time, increasing the salary of such an employee may not harm them.

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Both the monetary and non-monetary incentives tend to make the employee quite independent and free. For instance, the monetary incentives are based on the argument that an employee is satisfied when rewarded to satisfaction in terms of money. Increasing the salary and the allowances of an employee therefore means their primary satisfaction. This is bound to increase the loyalty of the employee to the firm. On the other hand, enhancing the employee’s independence and flexibility of working hours is bound to bring the same effect. Therefore, both incentives aim at better standards of the employee. Both incentives have their advantages and disadvantages, which brings about the differences between them.

Differences

Monetary incentives differ by a big margin from non-monetary incentives. The fact that monetary incentives view employee satisfaction in terms of money proves the difference. This brings about the advantages and disadvantages of the two. For instance, the monetary motivation schemes tend to be easily understandable for most employees. This is because of their privacy and efficiency.  Since the reward is simply financial, the employees readily strive to attain the set goal. On the other hand, non-monetary incentives concentrate on the environmental satisfaction of the employees. The recognition and appreciation can be great workplace motivators. Once an employee feels appreciated, they feel at a better place to gain concentration and enhance the quality of performance. When an employee feels important to an organization, they will always try to stay on the team. The recognition and appreciation of an employee is cheap to the organization. This is greatly applicable to an economically unstable organization. The recognition and appreciation of an employee rewards loyalty of the employee to the organization. For instance, the introduction of the ‘Employee of the Month’ program will bring some competition for loyalty and quality among the employees (Abdullah & Wan, 2013). This improves the quality of the services as well as the satisfaction of the employee who emerges as the winner. The feeling of being valued for what an employee does yields loyalty to an organization.

Secondly, the monetary rewards are applicable to all levels of staff. All staff in an organization are employees of the institution. The incentive employed should therefore be applicable to all employees irrespective of the rank. The monetary incentives also create some independence to the respective employee in how to utilize the reward. Since money is a universal reward, it is up to the employee to decide on how to use it once rewarded (Abdullah & Wan, 2013). The monetary incentives are thus advantageous to both the organization and the respective employee. The application of the incentive is also simple and does not entail many procedures. On the other hand, the non-monetary incentives tend to target the lowly ranked class of employees. Moreover, the non-monetary motivation schemes target mainly the employee engagement. This ensures quality services from employees. In addition to that, the reward of non-monetary motivation schemes can be affected immediately without making requests to the payroll team (Hammermann & Mohnen, 2014). This, as opposed to the monetary motivation schemes, is economical and time conscious. Unlike the monetary motivation schemes, the non-monetary motivation schemes do not have to break the bank. This saves money as well as yielding positive impact on both the employee and the organization.

Most employees want the highest levels of independence (Hammermann & Mohnen, 2014). This autonomy gives them a greater sense of satisfaction. After the directions are given from the head of the concerned department, the employees need to be set free to exercise their duties. This freedom acts as a non-monetary incentive. The freedom can also improve the innovation and creativity of the concerned employees by allowing different ways of executing their duties freely. Most employees argue that continued close supervision makes them lose focus on their respective duties. The non-monetary incentives bring this autonomy and employee independence. The monetary incentives on the other hand concentrate on monetary issues. For instance, timely payment of salaries and wages aids in maintaining the loyalty of employees to the firm. In addition to that, the introduction of bonuses for the employees is another monetary incentive. The bonuses act as an incentive to perform better. In most cases, the bonuses are linked with the profitability and productivity of the organization. The inclusion of financial incentives like the various allowances also motivates employees greatly. The medical insurance, commuter perquisites, and education are some of the main allowances that are implemented as part of monetary incentives. In most cases, these allowances increase with time. This also motivates the employee. The loyalty of an employee is easily affected positively by the increment of these allowances. The general increment of the salary of an employee is also part of monetary incentive. It is in some sense considered as promotion.

The effect of monetary incentives at times is not realized. The incentive bonuses mostly dissolve in the salary. The employee may therefore fail to notice the impact of a small increase in a huge salary. In most cases, employees may tend to budget for the salary irrespective of whether the monetary reward is inclusive or not (Abdullah & Wan, 2013). This makes the reward disappear into the employees’ monthly expenditures. In this case, the impact of the incentive is not experienced by the employee, nor the organization at large. This limits the efficiency of the incentive. The application of the monetary incentive methods is therefore subjected to many factors. The nature and structure of the employees and the monetary status of the organization should be considered first. This barrier seems to be bridged by the non-monetary incentives.

The introduction of flexible schedules in an organization is a non-monetary incentive to some point (Abdullah & Wan, 2013). Most employees may prefer flexible schedules to a promotion or raised salaries. It is most likely to make the workers with flexible hours more motivated than those with inflexible schedules irrespective of the salary. For instance, offering workers an opportunity to arrive earlier and leave earlier or arrive later and stay later makes the employee more motivated. This flexibility also makes the employee feel free and self-responsible. Flexible schedules yield the employee commitment and improved services. Unlike the non-monetary incentives, the monetary incentives do not major in flexibility, but find an equivalent monetary value. Embracing latest technology in an organization highly motivates the employees. This is achieved by continuous training and enhancing an organized information flow within the organization. The monetary incentives major in finding a monetary compensation to the employee with such technology. This limits the chances of the other employees. The monetary incentives also do not embrace on flexible schedules, but give a monetary motivation to the neat and time conscious employees.

Conclusion

In conclusion, motivation of employees is quite important. The productivity of an employee is greatly contributed by the motivation. The two main types of incentives are the monetary and non-monetary incentives. Both types aim at improving the productivity of the employee. The monetary incentives motivate employees by increasing their net salaries and wages. On the other hand, the non-monetary motivation schemes aim at meeting the needs and wants of the employees for them to be satisfied. Both monetary and non-monetary incentives are not self-sustaining. For effective motivation of employees, it is recommended to implement both.