Financial incentives: Monetary benefit offered to employees to encourage behavior or actions is called financial incentive.

• Financial incentives are boon for skilled and proficient employees or workers because they boost their enthusiasm, courage, self-confidence and efficiency.
• Financial incentive gives security to the employees and increases their social status.

Types of financial incentive:

1. Profit sharing:

• When workers get a definite proportion of profit in the form of money other than their salary, it is called profit-sharing.
• Profit sharing is based on the concept that surplus profit of the business is the result of the joint efforts of the workers and owner.

2. Co-partnership:

• When employees or workers are taken as partners in ownership, management and distribution of profit, it is known as co-partnership.
• Since these employees or workers are taken as co-partners, it becomes easy for owner to increase production and to maintain industrial peace.

3. Promotion:

• The process of placing the staff in a higher and beneficial position is known as promotion.
• Promotion increases authority, responsibility, duties and salary of the employee.
• Promotion increases the efficiency of the staff and his morale.

4. Bonus:

• When a business earns profits, its credit goes to workers as well.
• On the basis of this thdught, the organization at the end of each year distributes ceiiain percent of profit among works. This distributed amount is known as bonus.

5. Commission:

• In order to increase sales, business units decide sales target for the employees appointed in sales department.
• To see that the .sales executives achieve these targets, the business units provide them certain financial incentive on sales. This is called commission.

6. Prizes:

• When certain employees show outstanding performance or style of working, they are honoured for their services in the form of cash prize along with certificate and medal by the business units.
• Such prizes are given in annual meeting, get-together or by arranging a special felicitation programme. Distributing prizes before all the staff members boost encouragement, zeal and efficiency of the workers.

7. Suggestions and advices:

• Workers are constantly engaged in production. While working they come across several ideas and suggestions to improve the process, reduce costs, improve productivity, etc.
• They may give such suggestions and advice to the management to improve the production process and make it more efficient.
• When these ideas and suggestions prove fruitful, the workers are paid monetary incentives.