3.6.4 - Financial and non-financial motivation

Financial methods of motivation

Financial methods connect employment with earnings through different payment arrangements.

Piece rate pays for each unit of output. The assembler in the first worked example earns £1.20 for each acceptable unit. Extra output raises earnings, but the method needs measurable individual output and suitable quality controls. Employees may rush, and equipment or material shortages can affect earnings outside their control.

Commission links pay to sales, often as a proportion of sales value. The salesperson in the second example receives 4% commission on £25,000 of eligible sales. This can encourage selling, but a poorly designed scheme may reward unsuitable recommendations, discounting or unprofitable sales. Team selling also raises the question of how individual contributions are credited.

Worked example 1 - piece-rate earnings

If ten further units fail the quality check, they do not earn piece-rate payment under this stated scheme.

Worked example 2 - sales commission

Commission is the employee's reward. It is not the firm's profit, which depends on costs as well as sales revenue.

A salary scheme provides a stated payment over a period rather than payment for every unit. Stable income can support security and make it easier to perform duties that are difficult to count individually. A salary does not mean employees lack all incentives: progression, recognition, performance review and job content can still influence effort.

Performance-related pay links an additional reward or pay progression to assessed performance. A business may use individual or team targets, numerical indicators or a broader appraisal. The method can direct attention to priorities if employees regard the measures as fair and achievable. It can also encourage gaming, competition at the expense of cooperation or concentration on measured tasks while important unmeasured work is neglected.

Financial reward matters differently to employees and must be affordable. The business should examine whether the reward genuinely links to controllable, useful performance and whether the cost is justified by the improvement.

On 13 March 2025 the John Lewis Partnership announced a further £114 million investment in Partners' pay and prioritised investment over a Partnership Bonus for that year. In March 2026 it announced a 2% Partnership Bonus. This distinguishes regular pay from a profit-related reward: a bonus can vary with business circumstances while employees still receive pay. Managers must explain the change and consider the reliability of income as well as the possible incentive. 2025 results, 2026 results.

Non-financial methods and the design of work

Non-financial methods change employees' influence, relationships or job experience rather than directly changing the amount paid.

Empowerment gives employees meaningful authority to decide how to deal with work within clear boundaries. Authorising a customer-service employee to resolve complaints up to a stated amount allows a prompt response and gives the employee responsibility. Merely telling employees they are empowered while requiring approval for every decision creates little actual influence. Skills and support are needed.

Team working allows employees to cooperate towards shared tasks or goals. It can provide belonging, mutual support and access to others' expertise. It may also create conflict or unequal contributions. Clear responsibility and a credible shared purpose help a team work effectively.