During the year 2018, a business made huge profits due to growing reputation of the business. In order to give due recognition to its employees and motivate them to continue with the good work, the company decided to give a certain percentage of profits to them.

Identify the type of financial incentive being adopted by the company.

Profit Sharing

The correct answer is option 2- Profit Sharing.

The type of financial incentive being adopted by the company is Profit Sharing. This involves distributing a percentage of the profits to employees, which recognizes their contributions and motivates them to continue performing well.

Profit Sharing: Profit sharing is meant to provide a share to employees in the profits of the organisation. This serves to motivate the employees to improve their performance and contribute to increase in profits.

OTHER OPTIONS

• Copartnership: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. Sometimes, management may allot shares in line of various incentives payable in cash. The allotment of shares creates a feeling of ownership to the employees and makes them to contribute for the growth of the organisation.

• Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.