Impacts of incentive on the performance of the employees

Impacts of incentives on the performance of employees
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Introduction
Employees are the key component to any organization and their performance will determine the productivity of any company or organization. Hence they are the key to success of any company. Employers who want their company to be successful must be ready to invest considerably on their employees. One of the ways through which employers ensures that their company is performing well is through the use of incentives. Incentives motivate employees and will keep them engaged and committed in their work thereby enhancing their performance (Laura, 2010).
Definitions
Incentive can be defined as anything either financial or non-financial that will motivate or encourage employees to do their work effectively and efficiently (Richard & Steven, 2011). Incentives contribute to greater outputs or performance of the employees. Performance on the other hand refers to how well employees fulfill their job requirements. Performance can be determined by the effort or skill of an employee (Engellandt & Riphahn, 2011).
Types of employee reward
Negative incentives; these are those type of incentive which are usually meant for those employees who are underperforming in the organization. These types of incentives are usually meant to discourage employees from certain traits which hinder their performance (Al-Nsour, 2012). Examples of negative incentives include the following; temporary isolation, suspensions without pay, demotions, penalties and fines, salary decrease, and extended working hours. In temporary isolation an employee who is underperforming will be isolated from the other employees. The isolated employee will feel uncomfortable working alone and this will enable him or her put more effort towards improving his or her performance in order to rejoin the rest of the employees again. A suspension without pay is another form of a negative incentive, which involves suspending an employee for a number of days without pay. The suspended employee will suffer the consequences of not receiving the payment for the number of days he or she is suspended.
On resumption of the duty after the suspension period is over the employee will not be willing to suffer the same consequences and will try to adjust his or her effort in order to improve the performance. A negative incentive can also be in the form of salary deductions or decrease. Such type of incentive will encourage the employee to work towards improving his performance in order to avoid the deduction or decrease in salary. Penalties and fines might also be imposed to employees who are under performing hence making them work harder so that they can avoid such type of penalties and fines. Finally demotion might also be used as a means of negative incentive to enhance the performance. The demoted employee will try to work hard so as to avoid further demotion or to get promotion.
Positive incentives, on the other hand are those types of incentives which are usually meant to encourage the employee. They are usually given to employees who are performing well in their work. Positive incentives are further divided into two categories namely, monetary and non-monetary incentives.
Monetary incentives are the incentives which are in terms of finances (Mdzani et al, 2011). Examples of such incentives include salary increments, annual salary increment, bonuses, allowances, health insurance premiums and housing allowance. Salary increment as an incentive is usually given to employees who perform better. By rewarding such hard working employees’ salary increment they will be encouraged to work harder and engage in their work, eventually improving their performance further. Bonuses can also help improve the performance of employees. Rewarding bonuses to the employees will motivate them and make them work harder in order to earn bonuses. Basic salary can also affect the performance of employees. Companies who are paying a better basic salary will motivate their workers. This is because the employees will not be willing to leave the company and will therefore work hard in order to be maintained by the company. The fear of being dismissed as a result of poor performance will motivate them to work harder and perform better. Allowances such as transport allowances, house allowance and performance based allowance, if given to the best performing employees will encourage the rest to work hard so that they can also be awarded with such allowances. Health insurance premiums will also motivate employees to work harder.<...