Financial methods of motivation Financial Methods 1. Time-rate (‘flat rate’) schemes. This payment method involves the employee receiving a basic rate of pay per time period that he works (e.g. £5 per hour, £50 per day, £400 per week). The pay is not related to output or productivity. Any time that the employee works above the agreed number of hours per week may make him eligible for overtime payments, often at ‘time and a half’ (e.g. £7.50 per hour instead of £5 per hour).

2. Piece-rate schemes. This payment method involves the employee receiving an amount of money per unit (or per ‘piece’) that he produces. Therefore his pay is directly linked to his productivity level. However, it is possible that in order to boost his earnings, an employee may reduce the quality and craftsmanship per unit, so that he can produce more output in a given period of time. 3. Commission. This is a common method of payment for salesmen (e.g. insurance, double-glazing, telesales). The employee receives a very small percentage (say 0.5%) of the value of the goods that he manages to sell in a period of time.

4. Performance-related pay (PRP). This is a method of giving pay rises on an individual basis, related to the employee achieving a number of targets over the past year. This is common with managerial and professional workers. 5. Profit sharing. This involves each employee receiving a share of the profit of the business each year, effectively representing an annual pay rise. It aims to increase the levels of effort, motivation and productivity of each employee, since their annual pay-award will be related to the profitability of the business. However, if the business makes low profits (or even a loss) then this is likely to have a detrimental effect on the level of motivation of the employees.

6. Share ownership. A common form of payment in many PLCs is what is termed ‘share options’. This basically involves each employee receiving a part of each month’s salary in the form of shares (usually at a discounted price). This forms a profitable savings-plan for the employee, and he can sell them after a given period of time. This should motivate the employees to work harder and increase their efforts, since the share price will rise as the company becomes more profitable, therefore increasing the capital gain on their shares. Many of these different methods of pay are likely to be supplemented by fringe benefits (or ‘perks’) such as private health schemes, pension schemes, subsidised meals, discounts on holidays and travel, cheap mortgages and loans, company cars and discounts when buying the company’s products. The total package of pay plus fringe benefits is known as the remuneration package.

Non-Financial Methods Delegation. This occurs when managers pass a degree of authority down the hierarchy to their subordinates. Empowerment. This involves a manager giving his subordinates a degree of power over their work (i.e. it enables the subordinates to be fairly autonomous and to decide for themselves the best way to approach a problem). Job enlargement. This involves increasing the number of tasks which are involved in performing a particular job, in order to motivate and multi-skill the employees Job enrichment. This is a method of motivating employees by giving them more responsibilities and the opportunity to use their initiative. Job rotation. This involves the employees performing a number of different tasks in turn, in order to increase the variety of their job and, therefore, lead to higher levels of motivation. Quality circles. This is a group of workers that meets at regular intervals in order to identify any problems with quality within production, consider alternative solutions to these problems, and then recommend to management the solution that they believe will be the most successful

Teamworking. This is the opposite production technique to an assembly-line which uses an extreme division of labour. Teamworking involves a number of employees combining to produce a product, with each employee specialising in a few tasks. Cell production is an example of teamworking. Worker participation. This refers to the participation of workers in the decision-making process, asking them for their ideas and suggestions. Works council. This is a type of worker participation and it consists of regular discussions between managers and representatives of the workforce over such issues as how the business can improve its processes and procedures (in production or marketing, for example). Worker-directors. These are workforce representatives who participate in the meetings held by the board of directors. Worker-directors are not very common in the UK, since employers often believe that they can slow down the decision-making process, as well as ‘leaking’ confidential information to employees.

Practise Exam Question Q1. Colin is a checkout clerk in a supermarket, Jane is a travelling sales representative and Mike is a bricklayer. For each person, say whether they are likely to be paid according to piece rate, hourly rate or commission, and explain why? 15 marks