Legal Definition Incentive

An advantage given to customers or businesses to make them do something they wouldn`t normally do. It is money that is offered to get them to offer something new. The event might not have happened without the incentive. Search the Legal Abbreviations and Acronyms Dictionary for acronyms and/or abbreviations that include incentives. Some methods rely on commissions, where the employee, like a salesperson, receives a payment that is directly correlated to his level of production. Companies also pay extra wages or rewards for employees who work overtime and an amount of extra work, incentives in this way make employees feel fair and willing to do the same next time. Other methods are less direct, such as awarding regular bonuses to top performers, the possibility of promotion to a higher-paying position, or a share of profits for team projects. [20] Alternatively, companies can offer incentives to their employees by threatening to demote or fire. [20] When workers feel that their careers are threatened, they demonstrate superior performance and effectiveness at work. On the other hand, incentives have a positive effect on education. For example, students may underestimate their own learning capacity. Incentives not only allow teachers or parents to pay more attention to students` abilities, but also encourage students to achieve good learning outcomes. However, it should be noted that monetary incentives may not be positive.

There can be corruption education in monetary incentives, and this monetary incentive is often contrary to morality. [35] Incentives can have a bipolar effect on the business. For one, company incentives for employees can lead to a wage gap. For example, low-paid employees may reduce their output or contribution to the firm. For example, low-wage workers and high-paid employees may not be able to communicate and cooperate effectively, causing low-wage employees to gradually lose their enthusiasm for work. [34] Firms should offer adequate incentives to both low-wage and non-low-wage workers, while incentives for low-paid work can be breaks rather than monetary incentives. Motivating employees with financial rewards can make a difference. Indeed, if the company is profitable in the first year, it can distribute many bonuses to employees. However, if the company makes less money in the second year than it did in the first year, it might not be able to give employees the same bonuses as the first year, even if they make the same efforts. It also reduces employees` motivation at work.

Therefore, incentives can be counterproductive. The company may offer other types of incentives instead of monetary incentives, such as promotions or vacation breaks for high-performing employees. Both intrinsic and extrinsic incentives are both important and influence people`s behavior. However, people`s intrinsic motivation tends to decrease, if they are offered too many extrinsic rewards to support action, constant incentives must be provided, which is known as the justification effect.