Topic 3 – Retaining and

Motivating

N5 Business Management

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Learning Intentions / Success Criteria

Learning

Intentions

Retaining and

Motivating

Success Criteria

By end of this topic you will be able to

explain:

• methods used to motivate staff —

financial and nonfinancial

• how businesses minimise staff

turnover

• the importance of stable staffing.

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Incentives

Businesses can motivate staff by using financial and

non-financial incentives.

• Financial incentives - using money to motivate

people.

• Non-financial incentives - using methods other than

money to motivate people.

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Financial Incentives

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• Salary

• Time rate

• Overtime

• Piece rate

• Bonus

• Commission

Salary

• Paying a fixed amount of

money per year in 12 equal

instalments (once every month).

• The employee knows how

much money they will receive

each month, but there is no

incentive to work harder or

produce more. e.g. £18,000

salary (12 instalments of

£1,500)

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Time Rate

• Paying per hour worked.

• The more hours worked, the

more pay is received.

• However, when the

employee has not worked

many hours, they will not

receive as much money. e.g.

rate of pay is £6.50 per hour

and working 30 hours per

week (£6.50 x 30 = £195)

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Overtime

• Working over the minimum number of

hours required per week.

• Overtime is usually paid at a higher rate

than normal, e.g. time and a half or

double-time.

• The advantage is that overtime is

optional, so does not have to be done

and allows the employee to earn extra

money if they want to.

• The disadvantage is that it might not

always be available, it may depend on

demand and seasonal fluctuations.

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Piece Rate

• An amount of money for each

item produced in addition to a

low time rate or salary.

• The more items produced, the

more money will be earned.

• Encourages people to work hard

and produce more.

• However, the employee might

produce too quickly, in order to

get more pay, and the quality of

the work might become lower.

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Bonus

• Receiving an additional

payment on top of a

salary or time rate.

• A bonus might be paid

for very good work or

for meeting a target.

• Encourages people to

work hard.

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Commission

• A percentage of money paid

based on the value of sales

a person makes.

• The more sales made, the

more commission is paid.

• Encourages employees to

sell more but might place

pressure on the employee to

make sales; could cause

them stress.

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Non-financial Incentives

• Offering flexible working practices.

• Providing good pay and condition.

• Giving people extra responsibilities to encourage

them and providing promotion opportunities.

• Providing permanent contracts.

• Praising people for a job done well.

• Allowing people to work in teams and/or take part in

team-building tasks.

• Providing training opportunities.

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Why is motivation important?

• Staff turnover is lower.

• The quality of the product will be higher.

• Better customer service is provided.

• The reputation of the business is improved.

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Industrial Action

Industrial action can be

taken by employees

when they are unhappy

with their employment

terms and conditions or

working relationship

with their employer.

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Types of Industrial Action

Strike Employees refuse to enter the workplace. They might

have a picket line or demonstration outside the business

to raise awareness of the issues they are facing.

Work to rule Employees only carry out the tasks and duties written in

their job description and no other tasks are performed.

Sit in Employees refuse to work and ‘sit in’ the workplace.

Go slow Employees work slower than normal in order to reduce

productivity.

Overtime ban No hours above the minimum required (as per the

employee’s contract) are worked.

Boycott Employees refuse to carry out a new task or to use a new

piece of machinery.

Demonstration A gathering of people raising awareness of a particular

issue.

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Impact of Industrial Action

The impact of industrial action can be very

serious for a business.

• Production can stop or be slower and this

might give the business a bad reputation.

• Customers might be lost to competitors.

• The image and reputation of the business

might be damaged.

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