Introduction

Human resources in all organizations focusing in hiring and retaining competent employees
and developing capabilities through different practices (Ulrich and Lake 1991). The finical
and nonfinancial benefits received by employee’s relationships called compensation
(Milkovich and Newman 1999). Human resource units consider a various compensation and
benefits practices considered by HR to guarantee maximum employment of the human capital
within the industry (Pynes, 2008). The direct compensation is the economic rewards, which
consist of salary, as well as remunerations; indirect compensation or additional pay is an
essential element of HRM (Ojo,1998). Compensation it offers wages to employees and
systematizes a significant budget to the employer (Montecchio, 2011).

To accomplish specified objectives, leaders’ capabilities generally depend on the actual

execution of rewards packages to inspire the workers and staff within and beyond their
expectation. The form of salary, wages, and same rewards as monetary exchange by
employees to encourage them to increase their Performance as output and benefits called
Compensation (Holt, 1993). Compensation the outcomes of employee contract which is the
segment of transition between the employee and the owner. From the perspective of workers,
it’s a necessity for survival. Pay should be fair regardless of the condition of the economy.
However, both the internal and external aspects of compensation are considered in the
concept as it exists today.

A total amount of monastery and non-monetary paid by a company to worker established on

effort achieved as prerequisite. In addition, Compensation also includes payments such as
bonuses, profit sharing, overtime, appreciation bonuses and sales commission. It can also
include non-financial remunerations such as care paid, stock sharing, resident paid. Research
in the economic sector showed that job dissatisfaction caused by bad working conditions,
unfair salaries (low compensation), and no promotions chances, Onikubo (2012) confirm that
are elevation and income. Therefore, to measure the job satisfaction extent we should always
consider five aspects: salary, elevation, effort, administrators, follower, and Spector (1997)
added conditional incentive, peripheral reimbursements, working situation and
communication among these aspects. Therefore, the payment system superiority and
durability affect the turnover of employees’ percentage, which means that; proper payment
led to increases the number of employee’s years put in service (Montecchio, 2011).

The aim of this study is to examine the impact of compensation (direct and indirect forms) on
the performance through mediating factor the job satisfaction. This study will use
compensation packages in form of (direct and indirect compensation).Direct compensation
has to do with salary part while indirect compensation is the peripheral benefits a worker
enjoys because of working in an organization.

Executive Summary

The dynamic relationship between employee compensation structures and overall work
performance is examined in the & quote; Impact of Cash and Non-Cash Compensation on
Employee Performance & quota; study. It is critical for companies to understand the
implications of different pay components as they work to maximize their human resources.
This study investigates how employee motivation, happiness, and performance are affected
by monetary rewards (cash compensation) as well as non-monetary perks and advantages
(non-cash compensation).

The impact of cash and non-cash compensation on employee performance is a multifaceted

and dynamic aspect of organizational management. Compensation strategies play a pivotal
role in influencing employees' motivation, engagement, and overall job satisfaction.
Both cash and non-cash elements contribute to shaping the work environment, impacting
employee performance in various ways. This research uses a mixed-methods approach.
Mainly this research followed some articles which combined qualitative information from
employee interviews and surveys with quantitative analysis of salary data. The research
intends to offer sophisticated recommendations for businesses looking to create efficient and
inspiring remuneration packages by exploring the complex interactions between cash and
non-monetary components.

Review 1 Cash vs. Non-Cash Incentives

The article explores the dynamics of cash and non-cash incentives in the context of
motivating and rewarding employees, challenging the notion that cash is the sole motivator. It
outlines cash incentives as clear monetary rewards for achieving specific goals, such as sales
quotas or project completion, providing tangible and quantifiable value to employees.
Examples of cash incentives include bonuses, profit-sharing, and salary raises.

Conversely, non-cash incentives are characterized as non-monetary perks aimed at

recognizing and appreciating employee achievements beyond financial remuneration. The
article highlights the diverse nature of non-cash rewards, such as travel vouchers, tickets to
events, high-tech gadgets, and experiential rewards like spa trips or global travel. It contends
that non-cash incentives often have a more memorable and lasting impact on employees
compared to monetary rewards.

The literature review emphasizes the benefits of non-cash incentives, noting their
memorability, cost-effectiveness, and ability to provide great value for money. The article
underlines their appeal to millennials, aiding in talent attraction and retention. Recognition,
shoutouts, extra leave, and flexible work hours are presented as effective non-cash incentives
that contribute to employee satisfaction, engagement, and overall well-being.

In concluding the literature review, the article advocates for a thoughtful consideration of the
specific circumstances and goals of the company when choosing between cash and non-cash
incentives. It suggests that while money is undoubtedly valuable, non-cash incentives play a
powerful role in establishing emotional connections with employees, recognizing their
contributions as vital to the success of the business.
https://incentivatesolutions.com/cash-vs-non-cash-incentives-all-you-need-to-know/

Review 2 Unveiling the Effectiveness of Non-Cash Incentives in Motivating

Employees
The article delves into the ongoing debate between cash and non-cash incentives for
employees, acknowledging the conventional preference for monetary rewards. It highlights
various examples of cash incentives, ranging from bonuses tied to sales quotas, team bonuses
for project completion, annual bonuses based on loyalty, to contests and profit-sharing
schemes. Despite this, the article presents a shift in perception by citing studies, such as one
from Wichita State University, revealing that non-cash rewards tend to be more effective in
motivating employees to achieve business objectives.

Drawing on the research, the article identifies four reasons why employees often prefer non-
cash incentives. These include the notion of justification, where non-cash rewards offer
luxuries employees might not buy themselves, social reinforcement as non-cash incentives
hold "trophy value" visible to peers, the separability factor, with cash incentives perceived as
part of salary and losing impact, and evaluability, as the perceived worth of non-cash rewards
increases with the effort put in.

The article further supports the effectiveness of non-cash incentives through a case study
involving Goodyear Tire & Rubber Company, demonstrating that tangible non-cash rewards
can significantly outperform monetary rewards. This experiment led to a 46% increase in
sales and a 37% improvement in the mix of products sold for the group receiving non-cash
incentives. The emotional response generated by visualizing tangible rewards is proposed as
a key factor contributing to their success.

Finally, the article provides a list of non-cash incentives for the workplace, including travel
vouchers, event tickets, fine dining experiences, high-tech gadgets, learning opportunities,
and unique experiences like lunch with the CEO, additional paid time off, and leisure
activities. The conclusion emphasizes the importance of tailoring incentive choices to a
company's unique circumstances and goals, recognizing the need to reward employees
effectively as a fundamental aspect of successful management and company growth.
https://www.lhh.com/us/en/insights/employee-incentive-programs/

Review 3 Redefining employee rewards based on their performance

The article explores the intricate landscape of employee rewards, challenging the notion that
cash is the ultimate motivator. Tracy Michaud, HR manager at Hitchcock Chair Co.,
emphasizes the potency of a simple "thank you" as a powerful means to encourage superior
performance and endorse cherished company behaviors. Despite economic challenges, the
article questions the effectiveness of cash rewards, citing concerns about tax implications and
the risk of creating entitlement among employees.

The analysis introduces the idea that cash rewards lack the ability to reinforce brand loyalty
and might lead to expectations for regular payouts. Drawing insights from experts like Karen
Hessian, the article highlights that the choice between cash and non-cash awards depends on
the behavior being rewarded—performance-based or value-based—and understanding
employees' preferences based on demographic and psychological factors.

Through a case study at Hitchcock Chair, a value-based award program named "You're A
Star" is exemplified, demonstrating that non-cash rewards can foster employee interaction
and recognition for actions aligned with company values. The article presents a range of non-
cash alternatives, emphasizing the importance of employee engagement and tailoring rewards
to individual preferences.
The flexibility and popularity of non-cash incentive programs, as illustrated by The Carlson
Companies, introduce the idea of allowing employees to choose their rewards, providing an
engaging approach. The significance of recognizing potential effects on overtime and the
need for recalculating overtime for cash or non-cash rewards is highlighted. The literature
review concludes by addressing the employer's responsibility to show that an award is not
remuneration and provides tips on managing rewards related to regular and outside work
activities.
https://www.shrm.org/hr-today/news/hr-magazine/pages/0403cadrain.aspx

3.1 The impact of monetary, non-monetary incentives on performance

In a controlled field experiment where employees had to catalog books in a university library,
Kube et al. (2012) analyzed the impact of donations, i.e., incentives independent of results, on
results. Their research shows that people perform 25% better when they receive a non-
monetary gift, while a monetary gift of the same value has no significant effect on their
productivity. Kube et al. suggests that people may perceive a non-monetary gift as a gesture
of generosity from an employer who apparently invests time and effort in the gift, thus
eliciting positive reciprocity. cash has a negative effect on willingness to donate blood, non-
monetary incentives such as coupons have no negative effect on prosocial behavior. The type
of market, whether financial or social, determines the ratio of payment to effort. In the first
case, effort seems to be due to mutual motives and subjects determine their effort based on a
simple cost-benefit analysis; In the latter case, when non-monetary incentives are used, the
effort appears to be motivated by altruistic motives.

In addition to the effects of performance-based in-kind donations, the existing literature

analyzes the effects of performance-based incentives, which are also the focus of our study.
Jeffrey (2009) examines the motivational power of tangible non-monetary incentives through
a laboratory experiment with university employees. His results show that non-monetary
incentives are more effective than equivalent monetary incentives in improving performance,
even when people reported a preference for monetary incentives. He explains this result in
terms of justification concerns, as people may feel the need to justify the purchase of hedonic
luxuries. performance in competitions and the effect of non-monetary and monetary rewards.
Monetary incentives improve performance more effectively than non-monetary incentives.
This is also consistent with Condly et al. (2003), who show through a meta-analytic review
that money has a greater effect on performance than non-monetary material incentives.
However, Condly et al. (2003) also point out that the generalizability of their results is
limited because they are based on a small number of studies on non-monetary incentives and
the true market value of the non-monetary incentives used in their meta-analysis could not be
determined. Furthermore, there is
empirical evidence that people think more often about non-monetary tangible incentives than
monetary incentives; this higher frequency of thought has a positive effect on action.

https://www.researchgate.net/publication/
342978044_IMPACT_OF_COMPENSATION_ON_EMPLOYEE_PERFORMANCE

3.2 Employee Compensation

Employee compensation refers to benefits (money, vacations, etc.) that the employee receives
for the service provided to the employer. Reward means giving employees a monetary or
non-monetary reward for what they have done, which would be the basis of motivation
(Usman and Dugguh, 2014). Employee compensation is usually one of the largest costs or
expenses for an organization. We can also see it as the total cost of the employee or
employees, including the expenses paid to them and the cost of benefits paid in addition to
wages. According to (Chabra, 2001; Ahmad and Ahmad, 2014), compensation is a
combination of monetary and non-monetary benefits offered to employees for rendering
services to the organization. It is provided in the form of wages, salaries, and employee
benefits such as paid holidays, insurance, maternity leave, free travel, retirement benefits, etc.
Salary is an integral part of human resource management that helps motivate employees and
improve the organization. efficiency from the manager's point of
view, the compensation package offered to the company's employees is necessary not
only because it pays, but it is also probably the main reason why the employees work for the
company. The company's reward system also speaks volumes about the
company's values and culture. Employees often look more at what the company pays
than what it says. In many things, people behave as if they are rewarded. Rewarding
employees appropriately motivates them even more to achieve good results. Employees are
also likely to stay with the company, which reduces turnover. It also increases productivity
and profitability (Leonard and Thompson, 2019). Rewarding productivity starts with
employees feeling valued, which increases motivation and loyalty. A well-thought-out, equal
pay scheme should therefore be a priority for all employers. However, the salary plan should
not focus on the salary of the position. Compensation plans can and usually do include things
like bonuses, bonuses or performance bonuses, stock options, and a comprehensive benefits
package that supplements base salary.

3.2.1Financial rewards

This is typically understood to describe all financial means of pay provided by an employer
to an employee in return for their individual effort and contribution, skills, and work done.
Though there are many reasons why people work for a living, it is undeniable that money, or
other financial rewards, play a key role in motivating people in the workplace. There is a
wide variety of ways in which a business can offer money (or financial rewards) as part of the
pay package, including salaries, benefits in kind (fringe benefits), time-rate pay, piece-rate
pay, commission, and other performance related pay such as bonuses for achieving targets.
According to Kurfi (2013), financial compensation or rewards are monetary incomes that
accrue to personnel either directly or indirectly. These monetary incomes include wages and
salaries, bonuses and cash-based fringe benefits. Wage is the regular amount paid to an
employee based on the units produced or time spent on the job. Salary refers to the regular
amount paid to an employee for doing his job. Bonus on the other hand is a payment in
addition to basic wages/salaries. Lastly, cash-based fringe benefits are extra, mostly regular
money in addition to basic wage/salary. This includes transport allowances, meals
allowances, pension, and unemployment benefits, Sallah bonuses, etc.

It is generally understood as any means of financial reward offered by an employer to an

employee in return for his personal input and contribution, skills and work done. Although
there are many reasons why people work for a living, it is undeniable that money or other
financial rewards are key to motivating people in the workplace. A company can provide
money (or cash benefits) as part of a compensation package in a few ways, including salary,
fringe benefits, hourly pay, piece pay, bonus, and other performance-based compensation,
such as meeting performance fees. goals According to Kurf (2013), financial reward, i.e.,
remuneration, is financial income received by staff either directly or indirectly. This financial
income includes salary, bonuses, and financial fringe benefits. A wage is a standard amount
for an employee that is paid based on units produced or working time. Salary means the
regular wages paid to an employee for his work. An additional payment is an additional
payment to the basic salary. Finally, cash-based fringe benefits are bonuses, usually regular
cash on top of base salary. This includes transportation allowances, food allowances, pension,
and unemployment allowances, Sallah allowances, etc.

3.2.2Non-financial reward

The modern worker is no longer only motivated by a salary, and therefore organizations
regularly try to encourage employees with non-financial means. Non-monetary rewards can
have an even greater impact on employee satisfaction and motivation than traditional
monetary rewards. Non-monetary reward is a reward that focuses on the needs of most
people, although to varying degrees, for achievement, recognition, responsible influence and
personal growth (Armstrong and Murlis, 2004). Non-monetary compensation is any
compensation an employee receives from an employer or workplace that goes beyond the
financial compensation package to attract, retain and motivate employees. According to
Ngatia (2014), non-monetary rewards for employees include recognition, promotion,
flexibility (flexible schedules) and career development.

3.2.3 Flexible Schedules

Allowing a flexible work schedule helps boost morale and employee motivation. Flexible
schedule or afternoon free casual can help employees in some personal roles. Today's
workers
demand that their friends, family, hobbies, sports, children, and other activities. Flexibility
also means the number of hours that the employees worked either part-time, sharing work
arrangements or even a full-time job. Flexibility can also mean seasonal work or staged work
retirement of employees in the workplace. Flexible schedules have a positive effect on
employee efficiency, leading to better morale. The morale of employees is important because
when employees enjoy their work and their employer, they create a good working
environment for others. In addition, flexible working hours lead to increased productivity.
Employees are often willing to go the extra mile for this the company they work for can
achieve their goals. In addition, it allows for flexible working hours and better health for
employees. Building quality self-confidence helps keep stress at bay at a manageable level;
As a result, employees are happier and healthier. (Burns & McKinnon, 1993)

3.2.4 Promotion

Promotion offers opportunities for personal growth, increased responsibility and increased
social status. Promotion is an effective tool to achieve positive results for the company, the
behavior of its employees and maintain job satisfaction make employees believe that
promotion is possible. The fee structures it provides responsible and sufficient opportunities
for employee input, promotion and reward are related to a positive attitude towards work.
Promotion refers to the advancement opportunities offered by the organization. Promotion is
considered an important part of a career. These employees who realize they won't get a
promotion might cut back on their work, unless they believe they are still chasing future
promotions. From the other side on the other hand, employees who think a promotion is
likely to happen report a higher level of job satisfaction. Structures of the company's
reward system ie the means by which employees earn promotions, raises, or other benefits
important in determining performance. A fee structure that hinders the profession. The
development does little to encourage the employees’ contribution to the company’s success,
leading to lower performance. (Robbins, 2001)

https://www.hummingbirdpubng.com/wp-content/uploads/2020/06/HUJMSE_307-320.pdf

4. Methodology

Our research is totally online based. This report is group work. We are collecting all the
relevant information online and use it in our report. To enrich our knowledge and do our
work perfectly we are getting help from different websites, articles, journals, and blogs. After
collecting all the information, we analyzed it and tried to determine. We mostly use
secondary data for our report.

Conclusion:

In conclusion, a strategic combination of both cash and non-cash incentives can effectively
motivate employees, leading to improved performance, increased productivity, and higher job
satisfaction. The study underscores the pivotal role of motivation in enhancing employee job
satisfaction. Notably, effective compensation management emerges as a crucial factor in
fostering motivation, directly impacting employees' performance. Organizations must
prioritize well-structured compensation policies to project and bolster employee engagement.
Recognizing employees as integral to human resources, proper compensation is essential for
optimal performance, and its significance extends to productivity improvement and staff
retention. In conclusion, the interconnection between compensation management and
employee performance emphasizes the need for strategic planning, implementation, and
control in ensuring a thriving work environment.