Salary, the basic monetary incentive for every employee, includes bas…

Salary, the basic monetary incentive for every employee, includes basic pay and:

Answer & explanation

Correct answer: option 1

The correct answer is Option (1) → dearness allowance and other allowances

Option (1) dearness allowance and other allowances — Correct. Salary is the basic monetary incentive for every employee. It is made up of basic pay, dearness allowance and other allowances.

Option (2) bonus and a share in profits — Incorrect. Bonus is paid over and above the wages or salary. A share in profits is profit sharing, a separate financial incentive.

Option (3) pension and gratuity — Incorrect. These are retirement benefits. They give financial security after retirement, so they are separate from the salary.

Option (4) medical aid and education of children — Incorrect. These are perquisites, or fringe benefits. They are offered over and above the salary.

NCERT (2026-27 Edition): “Financial Incentives: … Financial incentives refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. These incentives may be provided on individual or group basis. The financial incentives generally used in organisations are listed below:
(i) Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance and other allowances. Salary system consists of regular increments in the pay every year and enhancement of allowances from time-to-time. In some business organisations, pay hike and increments may be linked to performance.
(ii) Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level.
(iii) Bonus: Bonus is an incentive offered over and above the wages/ salary to the employees.”

“(vi) Retirement Benefits: Several retirement benefits such as provident fund, pension, and gratuity provide financial security to employees after their retirement. This acts as an incentive when they are in service in the organisation.
(vii) Perquisites: In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid, and education to the children, etc., over and above the salary. These measures help to provide motivation to the employees/ managers.”