How do financial and non-financial rewards impact motivation?

In the context of motivation theory, financial rewards, such as salary and bonuses, are often seen as crucial for meeting employees' basic needs. According to Maslow's hierarchy of needs, financial compensation addresses the essential physiological and safety needs. Once these needs are satisfied, individuals are then more primed for higher-level motivations, such as esteem and self-actualization, which are often fueled by non-financial rewards.

Non-financial rewards, which can include recognition, professional development opportunities, and a positive work environment, play a critical role in enhancing overall job satisfaction and employee engagement. These rewards contribute to an employee's sense of value, belonging, and personal growth within the organization. It is often observed that when employees receive recognition and growth opportunities, they are more motivated and committed to their work, fostering a positive workplace culture and enhancing performance.

The combination of financial rewards addressing basic needs and non-financial rewards enhancing satisfaction and motivation creates a balanced approach that leads to a more motivated workforce. This interaction highlights the importance of both types of rewards in creating a motivated and productive workforce.