Different Financial Incentives, Essay Example

Describe at least three different financial incentives. List the major advantages and disadvantages for each.

“Financial incentive methods directly involve monetary rewards e.g. bonuses, pay rises, pensions etc.” (Financial and Non-Financial Incentives 2008) The first type of financial incentive is bonuses. Advantages to bonuses are it helps the business to support the objectives at hands by promoting team work, preventing absenteeism, and reducing sick time. It promotes and incentive for employees to perform on higher levels because they are being compensated for their efforts. Companies cannot decrease employee’s wages when the economic climate is bad, with bonuses there is no payment necessary if the company does not perform well. Bonuses can be designed to benefit the company’s overall needs. Disadvantages of bonuses are it can create unrealistic expectations. It can also produce a poor quality of work because employees are trying to reach a quota to receive their bonus. The second form of financial incentives is pay raises. An advantage is retaining and motivating key talent. Rewarding based on long-term performance. It motivates individuals to improve productivity. The areas contingent for pay increases can be determined by the company based on their needs. A disadvantage would be employees may only perform well in areas measured by review. Performance in any job is made up of multiple tasks and responsibilities and a single measure of performance may not accurately measure the employee’s true performance. It can also ruin employee morale by a one-on-one yearly evaluation of performance, if there is a need for improvement. And finally it can create the potential for rifts with employees if they feel they are being treated unequally if there are not clear stipulations being utilized. The final financial incentive is a pension plan. Advantages of a pension plan incentive are it is cost effective way to reward employees for performance. The contributions are tax deductable and the employees cannot lose this money if they fall on hard-ship. It is a deferred form of employee appreciation. Another advantage is it can build interest and value over the years. Disadvantages are it is a long-term incentive; employees do not get the money till they retire. In most cases they will lose a significant amount in interest and penalties if they access this money prior to retirement guidelines. Some individuals are motivated by instant gratification and are not motivated by this type of incentive. All financial incentives have their advantages and disadvantages for employee motivation. The organization needs to determine which one will best suit their needs for cost efficiency and employee performance incentives.

Financial and Non-Financial Incentives. (2008) Retrieved from http://www.ngfl-cymru.org.uk/eng/financial_and_non_f_motivation.pdf

Explain how organizations may manage the cost of employee health insurance.

Organizations have ways to manage the cost of the employee health insurance. A fast paced work environment, demanding hours, and physical expectations has an effect on an employee’s health. “These factors combined with declining quality of life and health habits are among the main reasons that continue imposing a financial burden to many employers in the United States and they are reflected in increasing health care costs, employee absenteeism and costs of employee turnover.”(Dursi 2008) An organization can manage the cost of employee health insurance by providing health promotion programs. Health promotion programs can include things such as an onsite gym or healthier lunch options at the cafeteria. Obesity can cause severe health issues, in turn creating a rise in the cost of employee health insurance. Implementing options for healthier living can aid in the battle of obesity. It can encourage employees to utilize the gym at the worksite based on convenience and cost. Employers can save cost on employee health care by implementing health risk assessments. This is typically a questionnaire and a risk assessment for the insured. It targets potential health issues that preventative care could resolve. It helps with addressing high risk areas before they become severe, costly health issues. Screening for blood pressure and cholesterol allows any potential problems to be caught early before they become a major health worry. This can provide the employee with knowledge for changing diets and medication to control these areas before they become serious. Unattended health ailments increase the cost of employee’s health insurance. Anti-smoking programs and alternatives will also save money in long-term health care. Smoking causes severe and potentially life-threatening damages to the body, which will add up the health care cost as well. Immunization is a low cost prevention that could help with the employee’s health. Disease management and stress management is also another way for an organization to manage the cost of employee health insurance. Preventative cost is a fraction of the expense that could result if these health issues are untreated. This is a major way companies can keep their health insurance cost low.

Dursi, Maria Cecilia. (2008) Can Health Promotion Programs Effectively Reduce Health Care Cost, Increase Productivity and Retain Qualified Employees? Retrieved from http://www.uri.edu/research/lrc/research/papers/Dursi-Healthcare.pdf

Explain the purpose of OSHA and how organizations may manage cost of industrial injuries.

The Occupational Safety and Health Administration purpose is to focus on the most dangerous workplaces by implementing results instead of red tape. The purpose is to save lives and prevent workplace injuries. (osha.gov) OSHA looks out for the overall safety of employees by requiring organizations to utilize every potential precaution. Organizations can manage the cost of industrial injuries in many ways. All too often industrial accidents occur due to negligence because of poor company standards or because of incompetent personnel. The organization must comply with the legal measures that have been passed by organizations such as OSHA, setting a standard to avoid occupational accidents. They set the provisions to ensure employees safety in potentially hazardous work environments. Danger zone warnings, will notify people of potentially dangerous areas. (How to Prevent Industrial Accidents) Another way to manage the cost is through quality assurance of the equipment. Accidents happen because equipment is not checked for quality; it can cost employees severe injuries or even lives. There are established standards that equipment must meet in order to be in compliance. Employee training is another key component in managing the cost of industrial injuries. They need to be trained the best way to handle dangerous equipment or substances. Being properly trained is key in making safe decisions. It is important to properly briefing employees on emergency procedures in the event of an industrial accident. If they are not briefed on what to do in emergency situations, there is a higher chance the individuals will be harmed. Managing cost of industrial injuries can be controlled proper handling of hazardous waste materials. By not disposing of hazardous waste chemicals and materials properly, there is a risk of injury. There is also a chance of fire and explosions. And finally an organization should implement health and safety inspection checks. There are organizations that can inspect the workplace and provide training to the employees for information on industrial safety and health.

Retrieved from http://www.osha.gov/doc/outreachtraining/htmlfiles/newosha.html

How to Prevent Industrial Accidents. Retrieved from http://www.howtodothings.com/business/how-to-prevent-industrial-accidents