ISSN (Online) 2581-9429

IJARSCT
International Journal of Advanced Research in Science, Communication and Technology (IJARSCT)

Volume 1, Issue 1, January 2020

Impact Factor: 4.819

Monetary Incentives to Improve Employee

Performance
Dr. Hemlata Thakur
Lecturer, Department of Modern Office Management
Government Women's Polytechnic College, Jabalpur, MP, India
hemlatathakur1972@gmail.com

Abstract: The goal of this study is to discover the connection between monetary incentives and their impact
on employee performance. The essence or objective is also to demonstrate that monetary incentives are an
effective motivator for employee performance in a society like ours where the cost of living is extremely
high. Employees are a priceless asset when it comes to attaining the company's goals, and to guarantee
that all employees are on board, they must be motivated and inspired, because incentives are one of the
methods that management employs to encourage inspired people.

Keywords: Employee Performance, Motivating Tool, Productivity, Financial Awards, Examples of

Monetary Incentives

I. INTRODUCTION
How to inspire employees to perform better is one of the main challenges that companies, in both the public and
commercial sectors, face. Most economists believe that financial incentives lead to better performance. Financial
awards for employee achievement, sometimes known as monetary incentives, are crucial in motivating staff in a
cutthroat workplace. The economic research claims that cash rewards are a very popular way for organizations and
businesses to improve employee performance. For a number of reasons, financial benefits are crucial to improving
employee performance. This particular study analyzes the proper monetary incentives and the importance of monetary
incentives to enhance performance in a competitive business environment. The purpose of this study is to determine the
importance of understanding monetary incentives, the reasons for introducing monetary rewards in the business market,
the nature of monetary rewards, and the benefits they provide to employees. The objective of the study focuses on how
the business market has changed as a result of the monetary incentive system. The literature review in this paper deals
with an important aspect of the process of monetary incentive policy to improve employees. The objective of the study
focuses on how the business market has changed through the monetary incentive system. Organizational performance is
a complex phenomenon largely affected by the ability and motivation of the workforce in any firm. One of the major
problems facing most employers in both public and private sectors is how to motivate their employees in order to
improve performance. The field of Economics is largely based on the assumption that financial incentives improve
performance (Igbaekemem, 2014). In consideration of the era of global hyper competitiveness in the business world,
incentives are fundamental imperatives to derive maximum employee inputs, retention, commitment from workers and
industrial harmony between the workforce and manufacturing concerns. It is generally believed that effect of financial
incentives is unambiguously positive; a large monetary incentive improves employee performance. Thus, employees of
an organization have motives and inner desires that are expressed in the form of actions and efforts towards job roles to
meet their needs. Employee motivation is the level of energy, commitment, and creativity that a company's workers
apply to their job (Ebrurajolo, 2004).
The issue of employee performance cannot be over emphasized. The most important thing for an organization is the
devotion and loyalty of its employees, which is achieved if the employees are paid with better rewards. Rewards are
highly concerned to overcome dissatisfaction and to increase performance of employees (Mehta, 2014). Despite the fact
that reward management has received substantial research attention, this has dwelt more on developed and emerging
economies (Carton, 2004; San, Theen, & Heng, 2012), with little done in the developing economies (Agwu, 2013).
Various researchers have come up with various ways to motivate people at work. However, because human beings

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 ISSN (Online) 2581-9429
IJARSCT
International Journal of Advanced Research in Science, Communication and Technology (IJARSCT)

Volume 1, Issue 1, January 2020

Impact Factor: 4.819
are different from one another in terms of needs, culture, religion etc. so does what motivate them also varies. Some
employees are motivated by financial and other incentives and some non-financial incentives. Managers continuously
seek for ways to create a motivating environment where employees will work at their optional levels to achieve the
organizational objectives. Since human resource is the most valuable resource of any organization, it must activate,
train, develop and above all motivate in order to achieve individual and organizational goals. According to Silverman
(2004), the central tenet of the distinction is that rewards are promised from the outset, whereas recognition is afforded
in a post hoc manner. He also posits that the essential distinction is that incentives are forward looking while rewards
are retrospective and that the difference is necessary when defining the objective of pay for performance.
In most business and other organizations, money is actually used in keeping an organization adequately staffed and not
primarily as a motivator. Any bonus scheme for manual workers should be related to criteria which are meaningful to
the employees and which are capable of being measured consistently. The incentive to achieve one particular objective
for example, increased volume, should not act as an incentive to worsen other standards of achievement like quality. It
is therefore, important to know what induces a worker most, as many people have different needs and aspirations.
Therefore, this research work examined the effects of monetary incentives on workers „performance in Nigerian
organizations with references to selected firms in Anambra State.

II. STATEMENT OF THE PROBLEM

There have been several problems associated with financial incentives on workers‟ performance on the part of workers
and managers in various business organizations. These are; Poor incentives package which have been a major factor
affecting employees‟ commitment and productivity, employees lack of willingness to increase their performance
because they feel that their contributions are not well recognized by their organizations and Management lacks the
necessary skills that could help in the formulation of a good monetary incentive policy. The success and the survival of
any organization are determined by the way the workers are remunerated and rewarded (Lawler, 2003). The reward
system and motivating incentives will determine the level of employees‟ commitment and their attitude to work.
According to Kreitner and Kinicki (2007), incentives are the compensation for doing work well given to a worker in the
form of both financial and non-financial incentives. However, for any organization to achieve its objective in any
competitive society, employers of labour must have a thorough understanding of what drives the employees to perform
efficiently and reward them accordingly. There is an increasing need for organizations to develop reward systems that
motivate staff to work harder. To this effect, this study attempts to critically analyze the effect of monetary incentives
on employee performance in firms within the three senatorial districts of Anambra State.

III. IMPORTANCE OF THE STUDY

The primary subject we concentrate on is the examination of financial reward, the significance of financial reward and
monetary incentives, and the method of raising employee performance through monetary reward in the cutthroat market
chain. The study's goal is to identify the system of financial rewards. (Wilson et al. 2018). This section of the analysis
goes into detail about the value of financial rewards in raising employee performance as well as the advantages that
rewards offer an employee. The study's goal is to examine closely the statement about financial incentives that is made
below.
(i) Relationship Between Monetary Incentives And Employee Performance- The global economy as well as a
worldwide business environment is based on a high level of market competition and employee performance. According
to the economic study, monetary incentives or rewards can help motivate employees to perform well in their work. In a
large business environment, incentives and rewards build a strong relationship between the business platform and
employees. This positive relationship creates a healthy business bond between monetary incentives and an employee's
performance.
(ii) Importance of monetary incentives to enhance employee performance- The monetary incentive system does a
responsible job of boosting employee performance in the global economic market. Rewards make employees happy
and motivate them to work. Monetary incentives determine the performance rate and further steps towards career
opportunities (Dugre et al. 2018). This mental support generally increases employee performance through monetary
incentives.

Copyright to IJARSCT DOI: 10.48175/568 98

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 ISSN (Online) 2581-9429
IJARSCT
International Journal of Advanced Research in Science, Communication and Technology (IJARSCT)

Volume 1, Issue 1, January 2020

Impact Factor: 4.819
(iii) Benefits for an employee through financial rewards- Monetary incentive provides various benefits
to employees that help improve employee performance. For example, monetary incentives improve employee morale
and retention, increase employee productivity, motivate employees, and ensure that they are top performers in the
marketplace.
(iv) Effect of monetary incentive in the competitive business market- The monetary incentive has a positive effect
in the globally competitive market. In this way, employee performance is improved in a large sector of the economy.
Employee productivity reduces various problems in the business market and creates a positive business atmosphere in
the global business market.

IV. PURPOSE OF THE STUDY

Participate actively in the economic market by studying financial incentives and their significance in raising employee
performance. The market chain is directly impacted by an employee's financial motivation. The manner in which
employees are compensated alters their sense of well-being. The company's productivity, which is the most crucial
factor in any firm, is impacted by this optimistic outlook. The importance of financial incentive systems for employees
to raise their performance in a firm and the process of competitive market exploration utilizing a financial reward are
the major subjects of this study or analysis paper. The area of the subject of this study on monetary incentive system
shows the various positive meanings of financial rewards for an employee. And this area of analysis also describes the
process of increasing employee performance every year (Qi e al. 2021). According to an economic report, the use of
monetary rewards for employees has resulted in various positive changes in the business world. Below
are some examples.
 Increase the quality of work and business productivity through an incentive system.
 Build a good relationship between colleagues and customers to increase the company's productivity.
 The incentive method promotes a positive attitude among employees toward their performance.
 The active mentality of the employees increases the productivity of the company through the incentive
process.

V. LITERATURE REVIEW
The most valuable assets a company has are its employees. As a result, it is crucial for businesses to find ways to
promote a positive outlook in order to grow both their brand and their profit margin. Human nature is quite simple, but
it can also be incredibly complex, which is why organizations need people. This makes it difficult for businesses to
understand how to inspire their workforce. A fundamental prerequisite for properly motivating people is understanding
human nature. Monetary incentives are a common desire of every employee. In the globally competitive market,
rewarding employees plays a crucial role in motivating them, enhancing their performance, and giving them the
opportunity to grow professionally. This process of employee reward promotes an employee's work performance or
mentality. The practice of monetary incentives is a bonus or reward for the employees of a company (Oldham et al.
2018). It is a general desire of the employees of a company that motivates the employees to perform well. A monetary
incentive is an additional commitment to employees in terms of their future growth, career opportunities, health care, or
any kind of reward for employees. So, it can be clearly stated that monetary rewards play a major role in both public
and private sectors. We can take the example of Oman College of Technologies, where this kind of method is used to
cheer up employees and make them perform at their best. Company owners have noticed that most employees, when
they achieve something on behalf of the company, expect a financial incentive for their best performance. It is clearly
observed that rewards in the form of monetary incentives spur employees to perform at their best and lead to new high
performance. It is clear that employees who are rewarded for their outstanding performance remain more motivated and
active in their respective roles, which in turn has a strong impact on their daily performance. Thus, it can be clearly
stated that monetary rewards play a major role in both the public and private sectors. We can use the example of Oman
College of Technologies, where this type of method is used to cheer up employees and encourage them to perform at
their best. . Reward in the form of monetary incentives helps to maintain employee satisfaction and has a great impact
on their performance in the department. It is observed that reward motivates wage earners only when they have done a
certain amount of hard work for an assigned task with pure sincerity.

Copyright to IJARSCT DOI: 10.48175/568 99

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 ISSN (Online) 2581-9429
IJARSCT
International Journal of Advanced Research in Science, Communication and Technology (IJARSCT)

Volume 1, Issue 1, January 2020

Impact Factor: 4.819
VI. METHODOLOGY
Based on their performance and productivity, financial incentives and reward systems offer an active way to inspire
employees of a company. In a chain of competitive markets, it's critical to raise staff performance to boost corporate
productivity. A fantastic way to inspire staff is by offering incentives or rewards for increased performance. This full
study is discussed in this analytical report on financial incentives and the significance of incentives to improve
employee performance. the methodology section describes the main tools or processes for critical analysis to find the
right results (Cao et al. 2019). The method or process to analyze the importance of monetary incentives to increase
employee performance in a company is based on several ways, such as horizontal analysis, vertical analysis, and
financial ratio or survey.
(i) Horizontal analysis- This study is based on the understanding of the importance of monetary incentives to increase
employee performance in business. The way of horizontal analysis is an analysis system based on financial reports and
historical data. The methodology of this paper describes the process of understanding the importance of financial
rewards for an employee. Through the process of horizontal analysis, researchers show how the changes have been in
an active organization by monitoring the incentives for employees. This analysis process also provides authentic
performance improvement data.
(ii) Vertical analysis- Vertical analysis is a method of analyzing financial reports as well as financial incentives in an
organization. This type of business figure is based on incentive opportunities for employees and provides real data on
the percentage of business performance of employees.
(iii) Financial survey for employee performance based on incentive- A financial report of an organization measures
the quality of employee performance based on financial rewards or monetary incentive schemes (Greimel et al. 2018).
This report provides realistic data about the company's productivity, employee performance, and overall incentive
systems based on their performance. This type of financial survey can identify the relationship between good
performers in a company and their efforts or performance to improve the business.

VII. CONCLUSION
The findings of the study support the assertions made by other academics that financial incentives alone are insufficient
to inspire personnel. Additionally, it's best to use both monetary and non-monetary incentives to their full potential
because, as they say, "Variety is the spice of life." The role, efficacy, and appropriateness of monetary and non-
monetary incentives are different from one another. To accommodate the various requirements and interests of
employees, a balance between monetary and non-monetary incentives should be found. Since motivation is a
complicated and individualized topic, there is no one optimum method for dealing with it. According to research,
financial incentives by themselves are insufficient to inspire workers. Wages are important because they provide the
basic necessities of life, but they are important primarily for what they symbolize to the recipient. For money to be used
as a motivational tool, managers must study their employees, the conditions under which they work, and the task they
perform. The value of incentives is determined by what people learn to associate with them. According to Imoisili,
high-performing employees do not work just to make money. They are motivated by enjoyment of performance,
interest in their work, and success itself.

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 ISSN (Online) 2581-9429
IJARSCT
International Journal of Advanced Research in Science, Communication and Technology (IJARSCT)

Volume 1, Issue 1, January 2020

Impact Factor: 4.819
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