Incentives Are: Definition, Type and Purpose

Incentives are – For employees, the term incentive is of course familiar. Incentive is a term that is often equated with bonus. This is not wrong, because according to the Big Indonesian Dictionary (KBBI) incentives are additional income in the form of goods, money and so on that are given to someone to increase enthusiasm at work. Another term for incentives is stimulus money. Incentives are often given to employees as a form of appreciation from the company.

For this reason, giving incentive money is usually related to the performance of an employee who has been evaluated by the company. If there is an employee who has good performance, he will get an incentive in a certain form. For more about incentives, check out this one article!

Definition of Incentives

Incentives are not salaries, even though both are rewards or tokens of service, but salary and incentives need to be distinguished. Salary is the basic right of employees who have worked in a company. Meanwhile, incentives are motivation or stimulus for employees who are able to improve their performance at work.

Incentives are often seen as bonuses and are one of the good news for employees who get them. By providing a number of incentives, every job that has high dedication will feel valued by the company where it works.

In other words, incentives are a form of reward or additional service marks beyond the basic rights of employees such as salary. Incentives can be in the form of money, goods or in other forms provided by the company to improve the performance of employees at work.

Apart from money or goods, incentives can also be given in other forms, for example, loans, additional allowances or even promotions.

Definition of Incentives According to Experts

Several experts in the book Human Resource Management: Theory and Cases expressed their opinions regarding the meaning of the term incentives, along with their explanations.

1. Hasibuan

Hasibuan argues that incentives are additional remuneration given to certain employees who have achievements above the standard achievements of other employees. Incentives are a tool used by companies to support the fair principle of compensation.

2. Heidjrachman

According to Heidjrachman, incentives are actions that aim to provide different wages or salaries, due to different work performance.

3. Andrew F. Sikula

Andrew F. Sikula expressed his opinion that an incentive is something that can encourage or has a tendency to stimulate an activity. Incentives are motives and rewards that are formed to improve production.

4. Pangabean

Pangabean defines the term incentive as a direct reward given to employees for having achievements that exceed standards and is determined on the assumption that money can encourage the performance of an employee to be even better, therefore those who work productively prefer their salary to be paid according to results. Work.

5. Samsudin

According to Samsudin, incentives are the provision of different wages or salaries and not based on evaluation of employee positions, but because of differences in work performance.

6. Gorda

Gorda expressed the opinion that incentives are a means to provide motivation to employees in the form of material that is given as a stimulant or stimulant intentionally to workers to be able to increase work productivity in the organization.

7. Simamora

Simamora believes that incentives are a program related to pay and work productivity of an employee.

Incentive Forms

According to the book Human Resource Management (2018) there are three forms of incentives provided by companies to employees. These forms of incentives are divided into individual incentives, team incentives and organizational incentives. Here’s an explanation.

1. Individual Incentives

The first form of incentives is individual incentives given to employees as a reward from the company for the performance and productivity of these employees. The advantages of individual incentives are as an additional source of income for employees, so employees who get incentives will feel motivated to work better.

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Even so, these individual incentives have the potential to make employees become selfish individuals, because employees become too focused on themselves to achieve their targets and sometimes suppress the performance of other employees who are considered competitors.

2. Team Incentives

The second form of incentive is a team incentive given by the company to teams that achieve predetermined targets. The advantage of this team incentive is that it can motivate employees to be able to work together in teams. Meanwhile, the weakness of team incentives is that the team can be too competitive to get incentives.

3. Organizational Incentives

The third form of incentive is the incentive given by the company if the performance of a company exceeds the planned target. This organizational incentive assumes that all employees work together diligently to achieve the company’s short-term goals, namely achieving a target.

The advantage of organizational incentives is that they can make all members of the organization receive fairly, so that cooperation occurs and there is no competitive atmosphere in an organization.

Meanwhile, the weakness of organizational incentives is that some employees can become lazy, because incentives are still given to each individual as a whole and do not depend on the performance of the individual.

Types of Incentives

Those are the three forms of incentives, besides the forms of incentives there are also types of incentives which are divided into two, namely positive incentives and negative incentives. Here’s an explanation.

1. Positive Incentives

Positive incentives are incentives that provide positive guarantees to be able to fulfill needs and desires. In general, positive incentives have an optimistic attitude and are given to be able to meet one’s psychological needs. Examples of positive incentives are praise, promotions, benefits, recognition, loans and so on.

There are two types of positive incentives, among which are the following:

Monetary incentive

Monetary incentives are positive incentives in the form of money.

Non-monetary incentives

Non-monetary incentives are types of positive incentives that can be in the form of security services, praise, recognition, suggestion schemes, job enrichment and promotion.

2. Negative Incentives

The second type of incentive is negative incentives, namely incentives given to correct one’s mistakes or standards. The purpose of negative incentives is to correct mistakes, so that the company will get effective results.

Negative incentives are generally forced to be given to someone when positive incentives are no longer working as a motivator or encouragement. Examples of negative incentives are transfers, demotions, fines and punishments.

Reasons for Providing Incentives to Employees

From the forms and types of incentives above, in general, the provision of incentives is carried out with due regard to the basis and not just random. Here are some of the basics used to provide incentives to employees, teams and organizations.

1. Performance

The first basis for giving incentives is the performance of an employee. Usually employees who have achievements or show that they have performance above average, will generally get special incentives from the company.

2. Employee Working Time

The second basis is the working time given to employees according to the working time in completing the job. For example, if there is an employee who can work on a project faster and better or has to work overtime, then that employee deserves an incentive.

3. Employee Seniority

The third basis is a person’s tenure in an organization. If an employee has worked for a company for a long time, he will generally get a greater incentive than an employee who has just worked for that company.

4. Employee Needs

Giving incentives to an employee is based on the level of urgency or the need for a better quality of life of an employee.

5. Fairness and Equity

The next basis for providing incentives is fairness and equity. Incentives will be given according to the work sacrifices that have been made by an employee.

6. Evaluation of Employee Positions

The position level of each employee can be a factor or indicator in giving incentives.

Purpose of Giving Incentives

From the notion of incentives, of course Sinaumed’s already knows that one of the goals of giving incentives is to provide motivation, so that employee performance will increase and ultimately benefit the company.

Giving incentives to employees is not without consideration, but has the basics described earlier. Companies or officials who provide incentives, in general, will have the expectation that rewards are not wasted and employees can realize the goals of the company.

If employees become more enthusiastic and motivated when working, then the company will also get significant benefits from the work of employees. The most visible thing from giving incentives is that the company’s productivity will be better and it can grow more rapidly.

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In general, the objectives of being given incentives are as follows:

  • Increase employee productivity
  • Encourage and generate work stimulus from an employee
  • Increase commitment in employee performance
  • Shaping behavior and views about work
  • Instill enthusiasm and enthusiasm for work

In addition to these incentive objectives, there are also several reasons why companies provide incentives to employees. Here’s an explanation.

1. The Employee Has Performed a Job Outside His Duties

The first purpose of providing incentives is to appreciate employees who have done something outside of their duties. As a rule, employees who have achieved or achieved more than the company’s goals, will receive a number of performance bonuses.

This is done by the company as an acknowledgment of the results of the employee’s efforts. Providing the best and most profitable service for the company.

2. Employees Participate in a Series of Training Activities

In order to increase the capacity of its employees, the company will usually send several employee delegations to attend courses or training. Employees who are delegated, will get a number of incentives.

3. Employees Who Become Business Representatives at an Event

Another purpose of providing incentives to employees is as a form of compensation. Because it is not uncommon for companies to send company representatives to visit an event.

Employees who become representatives, will get incentives. The goal is for employees to carry out their duties as company representatives in a better and more enthusiastic manner, so that they can grow the company’s image at certain events.

4. Employees have done important things for the safety of the company’s business

If there are employees who have done important things to maintain company security and the safety of the company’s business, then these employees will get incentives. The purpose of this incentive is to thank the company for the efforts of the employee in bringing the company’s business to a more stable position.

Benefits of Providing Incentives for Employees

In addition to these objectives, there are also benefits from providing incentives both for employees and for the company. Here’s an explanation.

The benefits of incentives for employees are of course quite clear, the first is that incentives can be a source of additional income for employees. But besides these benefits, there are also several other benefits.

1. Increase Work Motivation

The effect of incentives on employee performance is very significant. When employees are more motivated and have higher morale, they will do the best work for the company. In addition, employees will also feel happier, when they have passion and motivation at work.

2. Receiving income other than basic salary

Another advantage of providing incentives for employees is that employees will receive additional income apart from their basic salary. This of course can increase revenue and can be utilized by employees to meet their personal needs.

3. Will Feel Appreciated

The achievements achieved by employees are the result of their hard work and efforts to advance the company. That way, an employee who has made these efforts will certainly feel happy if he gets an award for his work.

Incentives can be a form of appreciation or a sign of gratitude from the company for the work of its employees. Because the commitment of an employee is measured qualitatively and quantitatively through the provision of incentives.

Incentive Benefits for Companies

Besides being beneficial for employees, giving incentives is also beneficial for the company. Sinaumed’s may think that giving a bonus for incentives can hurt the company, but giving incentives actually brings benefits. Anything? Here’s an explanation.

1. Employee Performance will Get Better

Incentives are a motivational boost from the company for its employees. Providing incentive funds is expected to be able to encourage the performance of employees to be even better. If employee performance gets better, this will also affect the progress of the company. Then the company will be more profitable.

2. Leaders will Get Respect from Employees

Another benefit of providing incentives for companies is employees who will respect the leadership of the company. By providing incentives, both monetary and in-kind incentives will make employees feel more valued. That way, it will increase respect on the part of company management and leaders.

3. Employees Who Have a Sense of Ownership of the Company

When a company recognizes the hard work and performance of employees by providing incentives, the company has a strong sense of ownership of employees. And vice versa, when something happens, employees will be loyal because of this sense of ownership.

4. Low Employee Turnover

With the provision of incentive money, it will make employees feel comfortable working in the company, so that in the end, work turnover will decrease, because there are many employees who choose to stay in the company.

5. Employees are willing to do something outside of their main duties

When they get incentives for working outside their main duties, employees will feel willing to do something outside their main duties. Employees will also be willing to work hard, because they feel happy because they have received incentives from the company.

That is the explanation of incentives is income in addition to basic salary. If Sinaumed’s is interested in knowing material about finance such as incentives, salaries or other things, then Sinaumed’s can find information by reading books.

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Author: Khansa

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