Provident fund, pension and gratuity act as an incentive for employees because they:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → provide financial security to employees after their retirement
Option (1) create a feeling of ownership among the employees — Incorrect. A feeling of ownership comes from co-partnership or stock option. Under it, employees are offered company shares at a price lower than the market price.
Option (2) link the payment of wages to increase in productivity — Incorrect. Linking the payment of wages to productivity is the aim of productivity linked wage incentives.
Option (3) provide psychological satisfaction rather than money driven satisfaction — Incorrect. Psychological rather than money driven satisfaction is the aim of non-financial incentives. Provident fund, pension and gratuity are money benefits, so they are financial incentives.
Option (4) provide financial security to employees after their retirement — Correct. Provident fund, pension and gratuity are retirement benefits. They give employees financial security after retirement. Knowing that this security is waiting for them, employees stay motivated while they are still in service.
NCERT (2026-27 Edition): “(v) Co-partnership/ Stock option: 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. In Infosys the scheme of stock option has been implemented as a part of managerial compensation. |