Types of non-financial rewards - Top Study Guide

Empowerment Usually takes the form of managers giving their employees more responsibility and involving them in (or giving them) decision-making (powers).

Advantages

Employees see empowerment as motivating.
Giving them more responsibility and involving them in the decision-making process usually makes them feel motivated, as they are glad to see that their contribution is valuable to the business. They also see the opportunity for promotion in the future as a result of empowerment.

Disadvantages

There is a danger of the employee making decisions that can put the business in a disadvantageous position.

Teamwork Involves putting employees in groups where employees are encouraged to work collaboratively with each other in order to fulfil a task.

Advantages

Workers might feel stimulated by others in the group, which increases their productivity.
Working in a group also initiates feeling of belonging and common effort which can also be motivating (refer to Maslow’s theory).

Disadvantages

When teams fails, the whole organization suffers.
Disputes between employees in a team can reflect on the whole of the organization. Not every organization can use this non-financial reward (consider different corporate structures).

Job enrichment (type of job enlargement) This is an attempt to give employees greater responsibility and recognition by expanding their role in the production process; involves giving an employee more work to do of a similar nature.

Advantages

Having more recognition for their work motivates the workers (check different motivation theories).

Disadvantages

This non-financial reward cannot be used in all contexts.
Not all employees feel motivated by this. In some organizations, low-skilled workers that do repetitive jobs would not usually be interested in this type of reward.

Job rotation (type of job enlargement) This involves an employee changing jobs and tasks they do from time to time, in order to give them a greater sense of the whole production process.

Advantages

This can be very motivating for the workforce, as they are able to see how the tasks they work on everyday are important for the whole of the business.

Disadvantages

Job rotation might be costly for the business.
In order to allow workers to work in different departments, they will need training.

Frequently Asked Questions: Non-Financial Rewards

What are non-financial rewards? What is meant by them?

Non-financial rewards, also often referred to as intangible rewards, are forms of recognition or compensation that do not involve direct monetary payment. They focus on meeting employees' psychological, developmental, or social needs, contributing to job satisfaction, engagement, and a positive work environment.

Unlike financial rewards (like salary or bonuses), their value is less about immediate cash and more about intrinsic satisfaction, growth, recognition, and quality of work life.

How do non-financial rewards motivate employees? Why are they important?

Non-financial rewards motivate employees by tapping into intrinsic drives beyond just money. They can:

Increase Recognition: Public or private acknowledgment makes employees feel valued.
Enhance Growth: Opportunities for learning and development show commitment to their career.
Improve Work-Life Balance: Flexibility and time off address personal needs.
Build Autonomy: Giving employees control over their work boosts engagement (as per theories like Daniel Pink's).
Foster Belonging: A positive culture and good relationships contribute to a sense of community.
Provide Sense of Purpose: Connecting work to a larger mission can be a strong motivator.

They are important because while financial rewards can attract and retain employees, non-financial rewards often drive higher levels of performance, loyalty, creativity, and overall job satisfaction, especially for roles requiring complex skills or intrinsic motivation.

What are examples of non-financial rewards?

Examples are numerous and varied, including:

Public or private recognition (e.g., "Employee of the Month," thank-you notes).
Opportunities for professional development (training, conferences, workshops).
Increased autonomy or control over work.
Flexible working hours or remote work options.
Additional paid time off or sabbaticals.
Mentorship opportunities.
Assigning challenging or interesting projects.
Verbal praise and constructive feedback.
Improvements to the work environment (e.g., better equipment, ergonomic setups).
Opportunities for cross-functional collaboration or leadership roles.

Which of the following includes non-financial and intangible rewards?

The terms "non-financial rewards" and "intangible rewards" are often used interchangeably to describe benefits or recognition that are not monetary. Therefore, any option that lists things like recognition, praise, flexible hours, development opportunities, interesting work, or a positive work environment would include both types of rewards.

If presented with a list, you would look for options that *don't* involve direct money (like salary, bonus, commission, stock) and instead focus on aspects of the job or work experience itself.

What is the difference between financial and non-financial rewards?

The primary difference lies in their nature:

Financial Rewards: Tangible, monetary payments or benefits with a clear cash value (e.g., salary, bonus, commission, paid time off, benefits). They directly impact an individual's financial status.
Non-Financial Rewards: Intangible benefits that improve the quality of the work experience, job satisfaction, or personal/professional growth (e.g., recognition, praise, flexible work, development opportunities, challenging work). Their value is psychological and intrinsic rather than purely monetary.

Both are important parts of a total compensation and reward strategy, appealing to different aspects of employee motivation.

Non-financial rewards are crucial for engagement and job satisfaction beyond pay.