Incentives: Definition, Goals, and Types

The term incentive is certainly familiar to employees. Incentives are a term that is often equated with bonuses. This is true because according to the Big Indonesian Dictionary (KBBI), incentives are additional income in the form of goods, money, etc. that are given to someone to increase morale.

Incentives are often given to employees as a form of appreciation from the company. Therefore, the offer of incentives is usually associated with the performance of employees who are rated by the company. If you have good employees, you get some form of incentive.

Here DailySocial.id explains in more detail.

Definition of Incentive

According to the KBBI, the definition of incentives is income in addition to the salary received by employees for performing a task.

So what is meant by incentives is a form of compensation from the company to workers as additional income on salary or monthly salary as a reward for their hard work at work.

Difference between Incentive and Bonus

At first glance, incentives are similar to bonuses in that they are compensation funds, but there are some key differences between incentives and bonuses. The purpose of providing incentives is to motivate employees and enable them to achieve goals that are in line with the wishes of the company. Bonuses are part of the profits.

The next difference between incentives and bonuses lies in the way companies offer them to their employees. Incentives and bonuses are given for performance, but the purpose of awarding contracts and incentive money is different.

Incentive Purpose Given

Then looking at what incentives are and how they differ from bonuses, let's look at some of the purposes of the incentives offered. Basically every company has its own reasons for paying performance bonuses to its employees. The objectives of the incentives offered are as follows.

Appreciation of Employees Outside of Their Duties

The first reason companies offer incentives is to get their employees to do things outside of their jobs. Employees with achievements that exceed company goals usually receive a performance bonus. This is done in recognition of business performance.

Employees Participate in Training Activities

In order to increase the capacity of its employees, the company usually sends several delegations of employees to attend training courses.

Employees Become Business Representatives in an Activity

Another purpose of providing corporate incentive funds is for compensation, because employees become company representatives in an activity. Employees get incentives so that company employees are more enthusiastic and grow the company's image at an event.

Employees Have Done What Is Important For Business Safety

Employees who have done important things to keep the company safe are also given incentives to thank the company for bringing the company's business into a stable position.

Incentive Benefits for Employees and Companies

Incentive Benefits for Employees

From the employee's point of view, the benefits of incentives are as follows.

Increased Work Motivation

The effect of incentives on employee performance is very significant with the motivation and morale of employees who receive incentive funds will achieve higher morale and will do their best for the company.

Receiving Income Other Than Salary

Another advantage of incentives is that employees receive additional income on top of their salary. This of course can increase income and be used by employees to meet other needs.

Cultivating a Sense of Appreciation

Employee achievements based on the results of their hard work and hard work to advance the company are more appreciated through the provision of incentives. Incentives are a sign of the company's gratitude for the performance of its employees. Because employee commitment is measured qualitatively and quantitatively with incentives.

Incentive Benefits for Companies

For companies, there are several incentive benefits given to employees, namely:

Improve Employee Performance

Incentives are increased motivation given by the company to its employees. The provision of incentives is expected to encourage better employee performance so that it affects the progress of the company.

Employees Respect Leaders More

Another benefit for companies that offer incentives is that employees will have more respect for leadership. Incentive money helps employees feel valued and increases their respect for management.

Increased sense of belonging of employees to the company

Evaluating employee achievements and efforts with incentives means employees have a strong sense of belonging.

Low Employee Turnover

The existence of incentive funds makes employees feel more secure in the company, which in turn reduces turnover and keep more employees in the company.

Employees who are willing to work outside of their duties

In addition, incentives for companies benefit from employees who are willing to do work outside of their duties. When employees receive incentives, it adds appreciation and encouragement to work hard for the company.

Types of Employee Incentives

Different companies offer different incentives. Types of incentives include:

Financial Incentive

Financial incentives are types of incentives that companies offer in digital and cash forms. Performance bonuses are paid in addition to salary. Employees usually receive it along with their payslip.

Non-financial incentives

Non-financial incentives are a type of non-monetary business incentive, usually housing, cars, education, health insurance, pension funds, etc.

Social Incentive

Social incentives are forms of incentives that are rarely realized by employees. Examples of this type of incentive include building better relationships with coworkers, company leaders, and customers.

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