The Impact of Financial and Non-Financial Rewarding System on Employee Motivation and Productivity: Balancing Incentives in Modern Workplaces

Abstract

The paper primarily focuses on employee motivation through financial and non-financial rewards as its goal was to help Croatian SME and Start-ups with designing fair and competitive rewarding system. It discusses how financial compensation such as salaries, bonuses, and profit sharing directly influence employee productivity. However, while financial motivation often yields immediate performance boosts, it may have limited long-term effects. Therefore, non-financial rewards, which include job satisfaction, recognition, work-life balance, and professional growth opportunities, play a significant role in sustained employee engagement and overall satisfaction. The research aimed to analyze the balance between financial and non-financial incentives, particularly in changing work environments. The methodology includes a literature review of over 80 scholarly works, focusing on both recent and past studies. The study highlights the complexities in determining the "optimal" combination of financial and non-financial rewards due to the unique needs and aspirations of individual employees.