Definition of Incentives

This time we will discuss calmly the meaning of incentives and their types, forms, objectives and indicators. Here’s the explanation …


Table of contents :

Definition of Incentives

Types of Incentives

  1. Types of Incentives Based on their Form
  2. Types of Incentives Based on Their Receipts

Forms of Incentives

  1. Incentives in the form of money
  2. Incentives in the Form of a Good Work Environment
  3. Incentives in the Form of Participation

Purpose of Incentives

  1. Incentive Purpose for Companies
  2. Incentive Purpose for Employees

Indicator of Incentives

  1. Employee Performance
  2. Employee Work Time
  3. Employee Seniority
  4. Employee Needs
  5. Fairness and Fairness
  6. Evaluation of Employee Position

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Definition of Incentives

Incentives are special compensation provided by the company to employees beyond their main salary to help motivate or encourage these employees to work harder and strive to continuously improve work performance in the company.


The principle of providing incentives is related to employee performance that exceeds the standards set by the company.


For hard work and work performance, employees will receive awards, it can be in the form of money, goods, and others.


This incentive is generally given to marketing staff who have succeeded in selling beyond the company’s target. For example, a salesperson who sells more than his sales target.


Several experts have expressed opinions about the meaning of incentives, including:


According to Andrew F. Sikula


Incentives are something that encourages or has a tendency to stimulate an activity, incentives are motives and rewards that are formed to increase production.


According to Samsudin


Incentives are the provision of different wages or salaries not based on job evaluation, but because of differences in performance.


According to Gorda


Incentives are a means of motivating employees in the form of materials, which are given as a deliberate stimulus or impetus to workers to increase their productivity in the organization.


Types of Incentives

understanding of incentives


The various types of incentives can be classified according to their form and based on their acceptance.


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  1. Types of Incentives Based on their Form

Material incentives : incentives provided in the form of commissions, bonuses, profit sharing, deferred compensation, and old age benefits.

Non-material incentives : incentives given to employees in the form of award certificates, promotion awards, social security, written and oral praise.

  1. Types of Incentives Based on Their Receipts

Individual incentives : the incentives given to employees for hard work and performance at work

Group incentives: provide incentives to employees according to the standards of each group / group

Factory-wide incentives: provide incentives to all company employees according to the payment criteria set by the company

Forms of Incentives

As stated in the definition of incentives above, incentives can take many forms. According to Koontz, incentives can be in the form of money, participation, and a good work environment.


  1. Incentives in the form of money

In general, employees prefer to receive incentives in the form of money. This is related to the realization of a better quality of life for employees from a financial perspective.


Good work performance will support opportunities to get incentives from the company. That way, the needs of these employees are fulfilled and become better.


  1. Incentives in the Form of a Good Work Environment

A good work environment is one of the dreams of workers. The reason is, with a good work environment, this will support work comfort and improve performance.


  1. Incentives in the Form of Participation

The opportunity to participate and communicate with higher-ups in the company can provide a boost to employee morale.


With this opportunity, an employee’s career can increase faster according to their performance.


In addition, with the opportunity to become a participant, an employee gets recognition and gets support from the company.


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Purpose of Incentives

In accordance with the explanation of the incentive definition above, compensation in the form of incentives is closely related to work motivation. So, incentives are given based on the performance or production of workers.


The following are the objectives of providing incentives:


  1. Incentive Purpose for Companies

Maintaining loyalty of qualified workers

Maintaining and improving workers’ working morale, which can be seen from absenteeism and labor turnover rates

By increasing the productivity of the company, in other words, production increases for each unit per unit of time, and sales increase

  1. Incentive Purpose for Employees

Increase and increase the standard of living with additional income in addition to the basic salary

Increase and increase employee morale so that workers strive to excel in the workplace

Indicator of Incentives

In providing incentives, of course, companies don’t just do it. In general, there are several indicators for providing incentives, namely:


  1. Employee Performance

Employees who excel or those who show above average performance usually always get incentives from the company.


  1. Employee Work Time

As the saying goes, time is money. The incentives received by employees can also be determined by the time employees work to complete their work.


  1. Employee Seniority

The tenure of an employee at the company also affects the amount of incentives he will receive.


  1. Employee Needs

Providing incentives to employees can also be based on the level of urgency of the employee’s need for a better quality of life.


  1. Fairness and Fairness

Companies also often provide incentives to employees based on the work sacrifices that have been made by these employees.


  1. Evaluation of Employee Position

Employee position level is also an important indicator in providing incentives.

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