The benefits of motivated staff

Motivated employees contribute significantly to a business's success by enhancing overall performance and efficiency. Financial methods can be used for motivating staff, and more money leads to staff feeling more valued and happier in their job.

Advantages of having motivated employees

• Increased productivity - Motivated staff work harder, which leads to higher productivity.
• Commitment to business success - Workers want the firm to do well and do their jobs well to help this happen.
• Higher staff retention - Staff who are motivated and happy in their jobs are more likely to stay with the firm.
• Cost savings on hiring - High staff retention is good for a firm as it means less time and money is spent recruiting and training new workers.
• Retention of experience - Keeping experienced staff is important as they know how the business works. Experienced staff are more efficient and may handle specific customers who appreciate the familiarity.
• Easier recruitment - Highly motivated staff may attract new employees, making recruitment easier by generating lots of applicants.

Differences between wages and salaries

Most people receive remuneration (payment) for work (except voluntary workers). The more a worker is paid, the more motivated they feel to do their job.

Wages

Wages are commonly paid weekly or monthly, usually to manual workers. The amount paid is based on the number of hours worked by the employee.

Salaries

A salary is a fixed amount paid every month regardless of hours worked. Salaries are usually paid to office staff who don't directly help make products.

Advantages and disadvantages of salaries:

• The advantage of a salary is knowing exactly how much the pay will be.
• Salaries don't link pay directly to performance, so don't encourage employees to work harder.

Types of financial incentives

On top of regular wage or salary, firms can offer financial incentives to motivate staff.

Financial rewards

• Bonuses - A lump sum added to pay, usually once a year when performance targets are met.
• Profit-sharing schemes - Where a percentage of the firm's profits is divided among employees.

Fringe benefits

A fringe benefit is any reward not part of a worker's main income. Examples of fringe benefits include staff discount on products, company car, gym membership, meal allowance or health insurance.

Key characteristics of fringe benefits:

• Fringe benefits cost money for the business but save it for the worker.
• Fringe benefits don't actually involve giving employees money, so they're seen as a non-financial method of motivation.

How financial motivation improves productivity

Being more productive means staff can produce goods faster or using fewer resources. This reduces the unit cost of each item produced.