---
title: "Incentives; factors affecting wage/salary"
subject: "Organization and Management"
chapter: 7
key: "semester_7/organization_and_management:incentives-wage-factors"
source: https://www.bctengineer.com/q/semester_7/organization_and_management/incentives-wage-factors
site: BCT Engineering
---

# Incentives; factors affecting wage/salary

Organization and Management · Chapter 7: Personal Management

- Asked in: 2074 Asoj, 3+5 marks; 2072 Kartik; 2070 Asar, 3+5 marks; year not given (asked 3 times)
- Video: [Factors Influencing Wage and Salary Levels](https://www.youtube.com/watch?v=uHSujnk8LGk) — Dr. Sandipkumar G. Prajapati
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_7/organization_and_management/incentives-wage-factors
- Whole chapter: https://www.bctengineer.com/md/semester_7/organization_and_management/chapter-7

## Question

What do you mean by incentives? Explain the different factors affecting the wage/salary structure.

## Short answer

Incentives are extra monetary or non-monetary rewards linked to performance, such as bonus, commission, recognition and promotion. Wage and salary structure depends on demand and supply of labour, ability to pay, cost of living, government laws, union bargaining, job evaluation, qualifications, productivity, prevailing rates, management policy, working conditions and social security benefits.

## Answer

#### 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.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. What are incentives?
   A. Penalties
   B. Rewards over and above normal wage to motivate better performance
   C. Loans
   D. Normal wage
   Answer: B. They link reward to performance. (Key point: Incentive meaning)

2. Which is a financial incentive?
   A. Recognition
   B. Flexible hours
   C. Bonus
   D. Awards of praise
   Answer: C. Bonus, commission, profit sharing are financial; recognition is non-financial. (Key point: Financial incentive)

3. Why do software engineers often get higher pay?
   A. Scarce skills have high demand relative to supply
   B. Union weakness
   C. Law fixes it
   D. Low productivity
   Answer: A. Demand and supply of labour affects wages. (Key point: Demand and supply)

4. Which factor reflects profitability and size of the firm?
   A. Job evaluation
   B. Ability to pay
   C. Qualification
   D. Cost of living
   Answer: B. Ability to pay depends on profitability and size. (Key point: Ability to pay)

## Related in Organization and Management

- [Wage/salary factors; training methods](https://www.bctengineer.com/question.md?key=semester_7%2Forganization_and_management%3Awage-factors-training) — Organization and Management, chapter 7
- [Interview, wage vs salary, incentive](https://www.bctengineer.com/question.md?key=semester_7%2Forganization_and_management%3Ainterview-wage-incentive) — Organization and Management, chapter 7
- [Training, development and incentives](https://www.bctengineer.com/question.md?key=semester_7%2Forganization_and_management%3Atraining-incentives) — Organization and Management, chapter 7

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