Incentives refer to all those measures which are used to motivate the people to improve the performance.

There are two types of incentive- financial and nonfinancial.

Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term. It may be provided on an individual or group basis. The different types of financial incentives are mentioned below:

a. Pay - salary is the basic incentive for any worker. It includes basic pay, dearness allowance, etc. The salary must be increased from time to time. The increments may also be linked to the employee's performance.

b. Productivity linked wage incentive-The which can be linked with the productivity of the individual. This can also be practiced at a group level.

c. Bonus-It is an incentive over and above the salary to the Employees.

d. Profit sharing-The profit can be shared to the Employees. It would help to increase the performance and contribute to the increase in profits.

e. Co partnership-The employees are offered companies share at a price lower than the market price. The management may also allot a share in line of various incentive payable in cash. This would create a feeling of ownership in the employee and make them contribute to the organization's growth.

f. Retirement benefits-It includes pension, gratuity fund, retirement provident fund. It provides security for retirement as well as serves as an incentive for the time they have spent working in the organisation.

g. Fringe benefits-It includes housing, medical aid, education to the children over and above the salary.

Non-financial incentives focus on the attainment of psychological, emotional and social needs of the employee. The different kinds of nonfinancial incentives are mentioned below:

a. Status- Status refers to the rank ok of the position in the organisation. The authority, responsibility, rewards, and prestige of job indicate the status given to a person holding a managerial position. Psychological, social and esteem needs of an individual are satisfied

by status given to their job.

b. Organizational climate-It indicate the characteristic which describes an organisation and distinguish one organisation from another. It influences the behavior of the individuals in the organisation. Some of these characteristics are–individual autonomy, reward orientation,

consideration to employees. If the manager takes serious efforts he can improve the organizational climate.

c. Career advancement opportunities- The manager must provide ample opportunities to its employees to improve their skills and be promoted to the next higher level job. Sound promotion policy and appropriate skill development programs would be helpful in this regard.

d. Job Enrichment-It means designing jobs which include a greater variety of work content, require a higher level of knowledge and skill,

give workers more autonomy and responsibility; and provide the opportunity for personal

growth and meaningful work experience. If the job is enriched it would itself become a motivation to the employee.

e. Employee recognition program- The employee must be properly recognized for his work. Recognition means acknowledgment with the show of appreciation. For example, congratulating the employee on good job performance, rewarding an employee for giving valuable suggestions, installing a certificate for best performances, etc.

f. Job security- It means that the employees must feel secure and stabilized regarding the job. They must have a sense of security about the current income and the work.

g. Employee participation-The employees must be involved in the decision making of those issues which are related to them. These are practiced in the form of work committees or a Joint Management Committee.

h. Employee empowerment- It means Giving more autonomy and power to the Employees. It would make them feel that their jobs are extremely important and they would be able to contribute positively to their performance.