Most organizations recognize that they have needs towards their employees to provide them with insurance and certain types of compensations. These benefits include financial and non financial types of rewards, which are generally paid indirectly rather then directly, cause benefits cost money and this way, the firm can save money.
There are different types of views on direct financial payment, for example according to Lawler (1988), some scholars emphasize that paying employees based on ones performance can motivate them. However, some scholars emphasize skill-based pay to motivate employees to learn new skills and to be helpful for organizational changes according to Chu (1996).
There are four main types of direct financial rewards, which are, basic pay, which is salary or wages given to the employee upon doing their job or service done. Secondly is the incentive pay, where the employee is paid for a specific job or task performed to meet the company’s objectives. This allows the employees to increase their job performance and it also motivates them to do better in the future. Furthermore, there are also stock options, which allow an employee after a certain time to buy and own part of the company, as a gesture of a job well done. This is a productive benefit because, since they own part of the company now, they feel obligated to help improve the company. Last but not least is the bonuses given. Bonuses are a sign of good faith given by the employer to the employee as a sign of job well done or for certain or special occasions.
According to Valentine (2006) Funds that are transferred from surplus to deficit units via financial institutions which act as intermediaries, borrowing from surplus units to lend deficit units is called intermediation or indirect financing. Indirect incentives play an important role these days in company, because it...