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Difference between Financial and Non-financial Incentives

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Incentive refers to all majors in the form of monetary and non-monetary rewards, which are used to motivate people to improve their performance. The incentives are classified into two categories or groups they are Financial Incentives and Non- Financial Incentives.

Difference between Financial and Non-financial Incentives

What are Financial Incentives?

Incentives and rewards that can be calculated in terms of money are called Financial Incentives. These are payments directly or indirectly in money. Numerous needs of a person can be satisfied with money. It satisfies both lower level needs and higher level needs of social status and power also. Therefore, money is considered the most powerful motivator. Pay and allowance, Productivity linked wage incentives, Bonus, Profit sharing, Prerequisites, Retirements Benefits, etc., are some of the financial incentives.

What are Non-Financial Incentives?

Incentives or rewards which cannot be measured in terms of money are called Non-Financial Incentives. These cannot be measured in terms of money. These provide psychological and emotional satisfaction to employees, which cannot be satisfied by money alone. These include Status, Organisational Climate, Job Enrichment, Job Security, Employee Participation, Employee Empowerment, etc.

Difference between Financial and Non-financial Incentives

Financial and Non-Financial Incentives

Basis

Financial Incentives

Non-Financial Incentives

MeaningThe incentives and rewards that can be calculated in terms of money are called Financial Incentives.The incentives and rewards that cannot be measured in terms of money are called Non-monetary Incentives.
SuitabilityThese are suitable in case of lower level employees.These are suitable in case of higher-level employees.
Satisfaction of needsThey satisfy the lower level needs.They provide psychological and emotional satisfaction to the employees. 
ExampleThese include bonus, profit sharing, prerequisites, etc.These include status, organisational climate, career advancement opportunities, etc.

Last Updated : 25 Jul, 2023
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