Page 82 - Cambridge IGCSE Business Studies

Cambridge IGCSE Business Studies Section 2 People in business

Methods of
Motivation

Financial rewards Non‐financial rewards
• Hourly wage rate • Job rotation
• Salary • Job enlargement
• Piece‐rate and commission • Job enrichment
• Bonus schemes • Quality circles
• Fringe benefits • Team working
• Profit‐sharing • Delegation

Figure 6.6 Financial and non-financial methods of motivation

If money is an important motivator then managers need to consider how best to
use it to achieve a well-motivated workforce. The methods of fi nancial rewards

identified in Figure 6.6 are explained below.

KEY TERM Hourly wage rate

An hourly wage rate means that workers are paid a fixed amount per hour worked.
Hourly wage rate: payment to The longer a worker is at work the more they get paid. For example, if a worker

workers based on a fixed amount
is paid $5 per hour and works 40 hours in a week, then they will earn a wage of
for each hour worked.
80 $5 × 40 = $200.

This is the most common method of paying production workers and non-
managerial staff .

The main advantage of this method is that the business only pays workers for
the number of hours they are at work.
However, the disadvantage is that workers’ pay is not linked to how much they
produce. For example one worker might produce an average of 20 units per hour
and another may produce 28 units per hour, but both workers will receive exactly
the same pay.

KEY TERM Salary

With a salary, workers are paid a fixed amount per year, which is usually paid
Salary: fixed annual payment to monthly. This method is best used for workers whose work effort is not directly

certain grades and types of staff
linked to production, for example supervisors, managers and professional staff .
not based on hours worked or

output. The advantage of this payment method is that workers do not receive more pay
if they have to work longer hours to complete a task. The main disadvantage is that

salary is not linked to worker effort or the amount produced.

KEY TERM Piece-rate
Piece-rate means that pay is based on the number of units of output workers
Piece-rate: payment to workers
based on the number of units produce. For example if a worker is paid $0.25 for every unit they produce, and they
produced. produce 600 units in a week, then their wage will be $0.25 × 600 = $150. Piece-rate
systems are only used to reward production workers.
The main advantage of this method is that workers are only paid for the number

of items they produce. The main disadvantage is that the quality of goods produced

may be poor because workers try to work too quickly to increase their output and pay.