Read this article to learn about the Role of Non-Monetary Incentives in Motivating Employees !

Incentives, financial as well as non-financial, are very important in inducing workers to perform the work effectively.

Research reveals that incentives and results are highly positively correlated. According to George R. Terry. “Incentive means that which incites or has a tendency to incite action”. Thus,, incentive is a stimulate or a reason for producing an action. If an employee is not induced by an action, it is not called incentive.


While motivating the employees, a manager makes use of incentives. Management, in every work organisation, tries to govern the behaviour of employees by satisfying their needs through incentives. Individuals has varied and diversified types of desires and needs.


Some of them can be satisfied easily by monetary incentives while some others needs something else and something more. Correspondingly, incentives can be two types-financial and non-financial.

Financial incentive:

Finance (money) has become integral part of every man’s life. Money is the primary means to satisfy the basic physical needs of daily life of a man; for example, food, clothing, shelter, etc. Abraham Maslow has arranged the human needs in the form of a hierarchy in order of their importance. Money is considered to be the significant motivator to satisfy the first three levels of needs in Maslow’s hierarchy of needs.

Does a financial incentive really motivate the employees? Money has been looked upon as one instrument among many for managing motivation. More often than to, managers tend to place major reliance upon pay, bonus and monetary incentives because they are easiest to manipulate. But research results do not always justify the efforts to use money as a motivator. For instance, evidence is available that many blue-collar workers will deliberative strict output even when working on a direct wage incentive plan.

The value of money is basically determined by what people have learned to associate it with. Increase in pay and wages, many a time, is considered to be an index of progress. David McClelland, who has done extensive research on his issue (money and motivation), points out that several research studies have revealed that person who score high on achievement motivation of psychological tests do not work for the prospect of making more money alone.


They are motivated instead by the love of accomplishment, interest in their work, and by the success itself. On the other hand, people with low achievement drive quite often will work for money when it symbolises something that they dearly want.

According to Herzberg, pay has little to do with motivation to perform effectively. He strongly condemns that pay is the only motivator. He contends if workers are given increase in pay, it will cure their dissatisfaction momentarily.

They will get hungry for an increase in pay again in no time. Then they will be dissatisfied as they were before. Therefore, an increase in pay will not motivate the workers to perform better. The managers are forced to concentrate on some other incentives called non-financial.

Non-financial incentives:

Monetary incentives are important in motivating all the categories of employees because every employee expects to be paid by the enterprise. His wages may affect he way he works-how much and how well. Financial incentives are necessary but inadequate to motivate the employees. They must be accompanies by non-financial incentives such as status, promotion, increase in responsibility, recognition to hard work, etc.


(i) status:

Status refers to the ranking of people from the viewpoint of organisation. Status means ranking positions, rights, duties, responsibilities of workers in an enterprise. Status is one of the most important non-financial incentives. Managers are status, conscious.

Every organisation is wedded to a status system; organisation cannot exist without status distinctions. It should be noted that an increase status will automatically result in increase in pay. Employee, in general will be more happy for escalated status than the increment in pay. Especially, for middle level and higher-level manager status is more important than money.

(ii) Promotion:


Promotion is defined as a vertical movement of employees in a hierarchy. Promotion is widely used incentive in almost all organisations. But, promotion depends on performance, skills, competence, and faculty of employees. That is the reason why only some people are promoted to higher levels than others.

(iii) Responsibility:

Many people have strong preference for challenging and responsible jobs and dislike monotonous, dull and boring jobs. If the job is more responsible it satisfied those people who are enthusiastic, dynamic, and versatile in encountering the challenging assignments. Increase in responsibility is one kind of non-financial incentive to the employee.

(iv) Recognition of work:


Many people have an inherent feeling that their work must be recognised and acknowledged. Appreciation and applause are the chief ways of recognition the hard work done by an employee. Such appreciation motivates employees. For example, a pat on the back for doing work in an efficient fashion will bring more happiness to the employee than the ritual increment in pay.

(v) Job security:

Perhaps the first preference for all the employees is the job security. Certain stability in the job ensures future income and the employee is motivated by the consideration of job security. Of course, one negative point is also associated with job security, i.e., when people feel that they are not likely to be thrown out, they become com-placement.