Each year, corporations spend a considerable chunk of money on giving incentives to employees through recognition awards, career advancement opportunities and ensuring a proper working environment. Employee incentives are the rewards either monetary or non-monetary that can influence the productivity of employees in an organization. They focus on rewarding employees who meet or exceed the targets of an organization to encourage productivity ( Armstrong & Stephens, 2005). However, discrepancies about the value of employee incentives remain despite the practice being widely practiced by major corporations. Effective decision making requires a comparison of the benefits and additional costs of implementing a policy. Marginal benefit refers to a change in total gain after executing an action while minimal cost refers to the difference in total cost resulting from applying an operation. A decision should be made when the marginal benefit exceeds the marginal costs. This paper conducts a cost-benefit analysis of providing employee incentives in an organization.
There are several benefits of providing employee incentives in an organization, with the main advantage being motivation and giving them a reason to continue doing their best. When employees perform better for an organization to meet the organizational objectives, it is logical to provide incentives that seek to motivate them as well as reward them for the job well done ( Armstrong & Stephens, 2005) . Offering benefits package to employees can be advantageous to the company as it increases work performance by inspiring employees to increase production and sales as well as encouraging creativity that can create a competitive edge for the organization. The incentives and excellent working environment improve employee motivation and productivity, which increases the profits of a company.
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Secondly, offering incentives attracts and retains quality employees in an organization which is an asset to provide a competitive advantage. In any workplace, having employees who give their best to the organization benefits the organization by increasing revenue and profits. On the other hand, losing talented employees and recruiting others to replace them can cost an organization regarding time and cost. As such, offering incentives and a better working environment reduces the risk of incurring such costs and maintaining a competitive advantage ( Milkovich, Newman & Milkovich, 2002) . The benefits show the employees that an organization appreciates their exceptional performance, thus energizing them to keeps the production and generate higher product value for the organization.
A good incentive plan can also save money on salaries since employees can accept lower wages for a better benefits package. This is beneficial since salaries are often the top expense for most businesses. In some instances, an employee prefers an organization offering better benefits than higher wages, which can be a form of saving for the organization ( Milkovich, Newman & Milkovich, 2002) .. Therefore, offering benefits reduces the amount of payroll that an organization pays to its employees. At the same time, an organization can also get a tax advantage from providing a benefits package to its employees that apply to pension plans and other insurance plans. Employers who offer health benefits to its employees can take advantage of economic health insurance plans that give them tax breaks.
On the other hand, while many employees prefer an organization that offers incentives in the form of monetary rewards, they come with disadvantages. Some incentive programs are associated with being costly, affecting the revenue and profits of the business. Giving incentives to employees may increase business costs and cut into the benefits of a company and may be significant if the incentives are provided to a large number of employees multiple times within a year. Costs can also be involved in training employees as an incentive to advance their careers. Developing employees into becoming competent to improve the performance of an organization may take up several costs ( Noe et al., 2006) . When a new employee enters an organization, they need training on an organizations culture. At the same time, employees value an organization that offers opportunities for career development through training which increases costs.
Secondly, small organizations are likely to pay a higher cost for offering employee incentives compared those large organizations due to the purchasing power as well as higher administration costs. Incentives can be costly if an organization fails to tie them to the right performance variables, resulting in spending more money on rewards. A company may also be forced to incur legal benefits in ensuring it complies with the statutory requirements. At the same time, any mistakes made in creating a benefits plan can lead to costly lawsuits and regulatory fines.
Additionally, an increase in the cost of health insurance means organizations may pay more substantial sums of money for employee benefits in comparison to the benefits. The benefits have witnessed a sharp increase in price which organizations may find it to be costly and challenging to offer the benefit plans ( Noe et al., 2006) . In some instances, organizations are required to share the cost of health insurance with employees as a means of keeping their expenses under control. An organization may also spend a considerable amount of money in finding the right insurance option for offering health benefits to its employees which may eat into the costs.
Due to the competitive nature of the business market, it is vital for organizations to calculate the costs and benefits of offering employee incentives. Business owners have to give serious thought to giving employee incentives through careful planning and implementation, with the decision on whether to offer employee incentives or not depending on the cost and benefits of the decision. From this cost-benefit analysis, the benefits of offering employee benefits in an organization are more than the costs that an employer will incur, which makes it more profitable to implement the initiatives.
References
Armstrong, M., & Stephens, T. (2005). A handbook of employee reward management and practice . Kogan Page Publishers.
Armstrong, M., & Taylor, S. (2014). Armstrong's handbook of human resource management practice . Kogan Page Publishers.
Milkovich, G. T., Newman, J. M., & Milkovich, C. (2002). Compensation (Vol. 8). New York: McGraw-Hill.
Noe, R., Hollenbeck, J., Gerhart, B., & Wright, P. (2006). Human Resources Management: Gaining a Competitive Advantage, Tenth Global Edition . McGraw-Hill Education.
