Usually, money is a source of motivation for employees. There is a relationship between motivation and compensation. This relationship is briefly discussed below on the bases of various motivational theories for compensation schemes:
Table of Contents
Motivational theories for compensation
Equity Theory
The equity theory proposes that employees examine the relationship between their outcomes from the job (such as pay, job satisfaction, recognition, and promotion) and their inputs (such as educational experience, skill, and effort).
This ratio is then compared to the ratios of other employees. If the ratios are perceived as equitable, satisfaction may occur, and vice versa.
Expectancy Theory
Victor groom’s expectancy theory suggests that employee behavior is a function of the outcomes that are received for the work and the value of those outcomes to the individual. The theory has the following three key concepts:
- Performance outcome expectancy: It means that an individual believes that every behavior is connected to an outcome and different levels of that behavior may be connected to different levels of that outcome.
- Value or attractiveness: It holds that the attractiveness of that outcome differs from one individual to the next
- Effort-performance expectancy: Individuals evaluate the effort performance expectancy relationship. I. E. they ask whether or not they are capable of performing successfully at certain levels and then translate those perceptions into probabilities of success.
Reinforcement Theory
The reinforcement theory explains an individual’s behavior as a response to a stimulus in the environment. It holds that behavior that is positively reinforced (rewarded) tends to be repeated in that situation, behavior that is punished tends not to be repeated in similar situations, and Rewards than are positive reinforces that strengthen the relationship between the situation and the behavior.
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