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Motivation in Practice: Financial motivation

In this section we will examine a range of financial rewards available to firms. The combination of a firm's pay structure is designed to:

  • Ensure the ability to recruit in a competitive market
  • Ensure a balance between costs and the value of sales revenue
  • Motivate employees to improve performance by providing a system that is fair, transparent and linked to contribution

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Remuneration is the entire package of material rewards received by an employee, which may include basic pay, bonuses, pension, share options and other fringe benefits

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Fringe Benefits

Fringe Benefits are any benefits given to employees in addition to their basic pay. Examples of fringe benefits are a company car, discounts on purchases, membership of clubs and societies, free food and drink.

Pay and salary strategy should be determined at the highest level of an organisation and should reflect the organisation's mission and culture. The structure needs to be reviewed regularly as part of workforce planning, because the external environment is constantly changing. What might have been a competitive salary in the past may no longer be so and staff shortages may be the result of maintaining this level. In addition, firms must review the pattern of differentials between jobs (the difference between wage grades across an organisation) to ensure that all grades receive returns that reflect their efforts and the value of their output. Salaries and wages should be part of job evaluation and reflect any changes in job descriptions.

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Be aware that a wage and a salary are different. A salary is an annual sum (usually paid in monthly) for the completion of a job, however long that may take. Salaried staff will not receive overtime payments.

Waged staff are paid an hourly rate (which may be higher if the employee is working more hours than contracted). Traditionally wages were paid in cash on weekly basis, but this practice is changing to bank transfers for security purposes. Although the distinction is becoming blurred, the two terms should not be used interchangeably.

Methods of payment

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The John Lewis Partnership

The John Lewis Partnership in the UK has long used this method of motivating its entire workforce, which receives an annual pay bonus based on the Partnerships profit performance over the year.

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Applying the various motivational theories we have examined over the last section, produce a 600 - 800 word report evaluating the motivational methods used by the John Lewis Partnership.