Class 12 Business Administration Notes · GSEB
Incentives
Incentives — the monetary and non-monetary rewards that convert motivation into sustained effort. GSEB Class 12 Commerce notes covering seven financial and six non-financial incentives with Indian workplace examples.
Last updated: 27 Oct 2026
Notes
What Are Incentives?
Notes — the key lines
Incentives are rewards or motivators that raise enthusiasm, courage, self-confidence and efficiency. Two families: financial (paid in money) and non-financial (security, recognition, responsibility). Both aim at the same end: willing best effort.
Incentives are the rewards or motivators that boost employees’ enthusiasm, courage, self-confidence and efficiency. Financial incentives are monetary benefits; non-financial incentives are non-monetary benefits. Both types aim at the same end: to make employees willing to give their best efforts.
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Trap — Incentives are not only money — an answer that lists profit sharing and bonus alone misses the whole non-financial half.
Financial Incentives
Notes — the key lines
Seven financial incentives: profit sharing, co-partnership, promotion, bonus, commission, prizes, suggestions. They give financial security and raise social status, so skilled workers stay. Co-partnership goes furthest: the employee becomes a partner in ownership and profit.
Financial incentives are a boon for skilled and proficient employees. They give financial security to the employee and raise his social status. Owners with a progressive and professional attitude provide the following financial incentives.
The surplus profit of the business is the result of the joint efforts of workers and owner. Workers get a definite proportion of profit in the form of money other than their salary; this is profit-sharing.
When employees are taken as partners in ownership, management and distribution of profit, it is co-partnership. It makes it easier for the owner to increase production and maintain industrial peace.
The process of placing the staff in a higher and beneficial position is promotion. Authority, responsibility, duties and salary all increase, so efficiency and morale rise.
Profit is the contribution of the workers also. As per the law, a certain percentage of profit is given as bonus to the employees at the end of the year.
Owners decide sales targets for sales-related employees and fix commission rates against those targets. Commission is paid as per the achievement of the sales target.
For outstanding performance, employees are honoured with a cash prize, certificate and medal at the annual meeting or a special programme. Public recognition boosts zeal and efficiency.
Workers engaged in production may suggest improvements to the production process. Monetary incentives are paid for suggestions that help reduce the cost of production.
Trap — Promotion counts as a financial incentive here, because it raises authority, duties and salary together.
Non-Financial Incentives
Notes — the key lines
Six non-financial incentives work through security, recognition, responsibility and belonging. Job security and public appreciation both raise enthusiasm. Welfare amenities and housing, insurance, transport sustain long-term effort.
Incentives not based on money are non-monetary incentives. They also boost the morale of the employees, and they work through security, recognition, responsibility and belonging.
For an employee, only salary is not important — security of job is also important. Job security inspires him to work with enthusiasm, so production increases.
Employees who surpass production targets within time, economically and efficiently are honoured publicly. They are motivated, and other employees are inspired to work.
Officers assign special responsibility for giving training and direction to subordinates. This develops the confidence of employees and inspires them to work more.
When a worker has been efficient for a long time, his advice is sought in policy formulation. The worker feels that he is an important part of the company and feels encouraged.
Over and above wages, medical services, canteen, library, leave with pay, sports, entertainment and training facilities are given. Employees work with perseverance, enthusiasm and efficiency.
Housing facility, life insurance, free education to children, books, and transport from residence to the place of work are provided as further incentives.
Trap — Welfare amenities stay non-financial even though the company pays for them — they are not paid in cash to the worker.
Key Takeaways
- Non-financial incentives work through security, recognition, responsibility and belonging.
- Job security and public appreciation both raise enthusiasm.
- Assigning responsibility and seeking advice make employees feel valued.
- Welfare amenities and family-friendly facilities sustain long-term effort.
Exam Questions
Exam Questions
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