Incentive means all measures which are used to motivate people to improve performance. These incentives may be broadly classified as financial and non Financial Incentives These refer to incentives which are in direct monetary form or measurable in monetary term and serve to motivate people for better performance. The generally used 

1. financial incentives are: 

a. Pay and allowances: For every employee, salary is the basic monetary incentive. It includes basic pay, dearness allowance, and other allowances. 

b. Productivity linked wage incentives: Several wage incentive plans aims at linking payment of wages to increase in productivity at individual or group level. 

c. Bonus: Bonus is an incentive offered over and above the wages or salary to the employees. 

d. Profit-sharing: Profit-sharing is meant to provide a share to employees in the profits of the organization. This serves to motivate the employees to improve their performance and contribute to increase in profits. 

e. Co-partnership/stock option: Under these incentive schemes, employees are offered company shares at a set price which is lower than market price. 

Sometimes, management may allot shares in line of various incentives payable in cash. 

f. Retirement benefits: Several retirement benefits such as provident fund, pension, and gratuity provide financial security to employees after their retirement. This acts as an incentive when they are in service in the organization. 

g. Perquisites: In many companies perquisites and fringe benefits are offered such as car allowance, housing, medical aid, etc over and above the salary. These measures help to provide motivation to the employees/managers. 

2. Non-financial Incentives: All the needs of individuals are not satisfied by money alone, psychological, social and emotional factors also play important role in providing motivation. Non-financial incentives mainly focus on these needs. Some of the important non-financial incentives are discussed below:

 a. Status: In the organizational context, status means ranking of positions in the organization. The authority, responsibility, rewards, recognition, etc indicate the status given to a person holding a managerial position. Psychological, social and esteem needs of an individual are satisfied by status given to their job. 

b. Organisational Climate: This indicates the characteristics which describe an organization and distinguish one organization from the other. These characteristics describe an organization and distinguish one organization from the other. These characteristics influence the behavior of individuals in the organization. Some of these characteristics are individual autonomy, reward orientation, consideration to employees, risk-taking, etc. 

c. Career Advancement Opportunity: Every individual wants to grow to the higher level in the organization. Managers should provide opportunity to employees to improve their skills and be promoted to the higher level jobs. Appropriate skill development programmes and sound promotion policy will help employees to achieve promotions. 

d. Job-enrichment: It is concerned with designing jobs that include greater variety of work content, require higher level of knowledge and skill; give workers more autonomy and responsibility, and provide the opportunity for personal growth and meaningful work experience. If jobs are enriched and made interesting, the job itself becomes a source of motivation to the individual. 

e. Employee Recognition Programmes: Most people have a need for evaluation of their work and due recognition. They feel that what they do should be recognized by others concerned. When such appreciation is given to the work performed by employees, they feel motivated to perform the work at higher level. 

f. Job security: Employees need their job to be secure. They want certain stability about future income and work so that they do not feel worried on these aspects. Job security acts as a source of motivation to the employees. 

g. Employee participation: It means involving employees in decision making of the issues related to them. In many companies, these programmes are in practice in the form of joint management committees, work committees, etc. 

h. Employee Empowerment: Empowerment means giving more autonomy and powers to subordinates. Empowerment makes people feel that their jobs are important. This feeling contributes positively to the use of skills and talents in the job performance.