What is an Incentive? Here's a Simple Breakdown!

What is an Incentive? Here's a Simple Breakdown!.

In simple terms, the meaning of "incentive" isn’t far from “bonus.” Employees or workers under a company or organization are entitled to receive a bonus for the hard work they’ve put in.

One of the main goals of providing incentives is to boost motivation. With this kind of reward, employees are expected to maintain the quality of their work and even improve their performance.

Curious about what incentives are and how they work? You’ve come to the right place! In this article, we’ll break it down into simple points just for you.

It’s important to note that the higher your position in the company, the bigger the incentives you might receive. And one way to climb higher in your career is by sharpening your skills and expanding your knowledge.

Without further ado, let’s dive into the details!

Definition of Incentives

According to the Kamus Besar Bahasa Indonesia (KBBI), incentives refer to additional income (such as money or goods) given to encourage better work performance.

Incentives are different from a base salary. Your salary is what you must receive for doing your job as described, while a bonus or incentive is extra and often reserved for those who meet certain criteria.

The way incentives are calculated usually depends on the company’s policies. Some companies give incentives equal to one month’s salary, while others might base them on the number of team members or extra hours worked.

Incentives aren’t just for office workers—other professions in service sectors like teachers and doctors also typically receive bonuses from the government or their employing organizations.

For example, during the COVID-19 pandemic, all healthcare workers in Indonesia received financial incentives from the government. Medical staff, midwives, general practitioners, and specialists were given bonuses ranging from IDR 5 million to IDR 15 million.

Types of Incentives

Let’s now explore the different types of incentives so you can understand how they work!

Positive Incentives  

As the name suggests, positive incentives are rewards given by companies to appreciate employees' hard work. These bonuses help employees meet their personal needs and wants.

Positive incentives come in two categories: monetary and non-monetary.  

• Monetary incentives are, of course, given in the form of money, with the amount depending on company rules.  
• Non-monetary incentives can include promotions, recognition, or awards.

Negative Incentives

Every action gets feedback—either positive or negative. If an employee excels, they can receive positive incentives. But if they fail to meet targets or harm the company’s reputation, they might face negative incentives, like demotion, reassignment, or fines.

Why Do Companies Offer Incentives?

As mentioned earlier, the main goal of providing incentives is to motivate employees. Companies that offer bonuses hope that workers will consistently perform their best.

Additionally, offering incentives helps companies boost employee loyalty and build a good reputation. A strong company image attracts more talented people who want to join the team.

Each company has its own bonus policy, but generally, incentives are given when employees:

• Successfully complete tasks outside their primary job responsibilities, such as covering for absent colleagues.
• Help the company in difficult situations.
• Represent the company at important events.
• Participate in training that enhances their skills and benefits the company’s growth.

So, that’s the basic explanation of incentives. If you’re interested in earning extra income, you could also consider starting your own business!