Financial incentives: Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. 

The financial incentives used in organizations are listed below.

1. Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, DA and other allowances. Salary system consists of regular increments in the pay every year and enhancement of allowances from time to time.

2. Productivity linked wage incentives: Several wage incentives aim at linking payment of wages to increase in productivity at individual or group level.

3. Profit-sharing: Profit sharing is meant to provide a share to employees from the profits of the organization This serves to motivate the employees to improve their performance and contribute to an increase in profits.

4. Co-Partnership/Stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. The allotment of shares creates a feeling of ownership to the employees and makes them to contribute more for the growth of the organization.

5. Retirement benefits: Several retirement benefits such as provident fund, pension and gratuity provide financial security to employees after their retirement. These act as an incentive when they are in service in service in the organization.

6. Perquisites: In many companies, perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education etc over and above the salary. These measures help to provide motivation to the employees/managers.

Non-financial Incentives: Incentives that help in fulfilling one’s psychological, emotional and social needs are known as non-financial incentives.

Some of the non-financial incentives are given below.

1. Status: Status means ranking or high positions in the organization. Whatever power, position and prestige an employee enjoys in the organization are indicated by their status. Psychological, social and esteem needs of an individual are satisfied by status given to their job. 

2. Organizational climate: This indicates the characteristics which describe an organization and distinguish one from the other. Individual autonomy, reward orientation, consideration to employees, etc are some of the positive features of an organization. If managers try and include more of these in an organization it helps to develop a better organizational climate.

3. Career Advancement Opportunity: Managers should provide opportunity to employees to improve their skills and be promoted to higher-level jobs. Appropriate skill development programs and sound promotion policy will help employees to achieve promotions. Promotions have always worked as tonic and encourage employees to exhibit improved performance.

4. Job enrichment: Job enrichment is concerned with designing jobs that include greater variety of work contentment and requires higher of knowledge and skill, to give workers more autonomy level and responsibility and provide opportunity for personal growth and a meaningful work experience

5. Employee recognition programs: Recognition means acknowledgment with a show of appreciation. When such appreciation is given to the work performed by employees, they feel motivated to perform/work at a higher level, eg.,

(a) Congratulate the employee on the completion of a difficult task. 

(b) Displaying names of star performers 

(c) Installing awards 

(d) Distributing mementos’

6. Job Security: Employees want their job to be secure. They want certain stability about future income and work so that they do not feel warned on these aspects and work with greater zeal. There is only one problem with this incentive i.e., when people feel that they are not likely to lose their jobs, they may become relaxed.

7. Employee participation: It means involving employees in decision making about the issues related to them. In many companies, these programs are in practice in the form of joint management committees, work committees, canteen committees etc.

8. Employee Empowerment: Empowerment means giving more autonomy and powers to subordinates. Empowerment makes people feel that their jobs are important. This feeling contributes positively to the use of skills and talents and job performance.