Incentives; factors affecting wage/salary

Incentives

Incentives are monetary or non-monetary rewards given to employees over and above normal wage or salary to motivate them to perform better. They link reward to performance.

Types

• Financial: bonus (the Bonus Act, 2030 of Nepal requires profit-making enterprises to give a share of profit to employees), commission, profit sharing, piece-rate, stock options, allowances.
• Non-financial: recognition, promotion, awards, job security, training opportunities, flexible hours.

Factors affecting wage/salary structure

1. Demand and supply of labour: Scarce skills (software engineers) get higher pay.
2. Ability to pay: The profitability and size of the firm.
3. Cost of living: Inflation and price levels; wages adjusted by the government's minimum remuneration decisions.
4. Government laws: The Labour Act, 2074 and the government-fixed minimum wage.
5. Trade union bargaining power: Collective bargaining pressure.
6. Job evaluation: Level of difficulty, responsibility and skill required.
7. Qualification and experience of the employee.
8. Productivity and performance of the individual.
9. Prevailing wage rates in similar firms or industry.
10. Management policy and philosophy.
11. Working conditions and risk (hazardous work gets extra pay).
12. Social security and fringe benefits (provident fund, SSF).

A fair structure attracts and retains good employees and reduces conflict.