Academia Open
Vol 10 No 1 (2025): June (In Progress)
Business and Economics

Financial Incentives as the Key Driver of Employee Productivity
Insentif Finansial sebagai Pendorong Utama Produktivitas Karyawan


Article View
  • Yuanis Yuanis*
Yuanis Yuanis
STIE Muhammadiyah Tuban, Indonesia *

(*) Corresponding Author
Picture in here are illustration from public domain image or provided by the author, as part of their works
DOI: https://doi.org/10.21070/acopen.10.2025.10754
Published March 14, 2025
Keywords
  • Financial Incentives,
  • Non-Financial Incentives,
  • Job Satisfaction,
  • Employee Productivity,
  • Multiple Linear Regression
How to Cite
Yuanis, Y. (2025). Financial Incentives as the Key Driver of Employee Productivity. Academia Open, 10(1), 10.21070/acopen.10.2025.10754. https://doi.org/10.21070/acopen.10.2025.10754

Copyright (c) 2025 Yuanis Yuanis

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

General Background: Employee productivity is a crucial determinant of organizational success, with incentives serving as a key motivational tool in human resource management. Specific Background: While financial and non-financial incentives are widely recognized as productivity drivers, their effectiveness in small businesses, particularly in the Indonesian context, remains underexplored. Knowledge Gap: Prior research primarily focuses on large enterprises, neglecting how incentive structures function in small-scale industries. Aims: This study examines the impact of financial and non-financial incentives, along with job satisfaction, on employee productivity at UD. Budi Karya Jarorejo, Kerek, Tuban. Results: Multiple linear regression analysis indicates that financial incentives significantly influence productivity (β = 0.4736, p = 0.000), while non-financial incentives have a smaller yet significant effect. Job satisfaction, however, does not show a significant correlation. The model explains 94.7% of productivity variance (R² = 0.947). Novelty: Unlike previous studies, this research focuses on the unique dynamics of small enterprises, emphasizing the role of contextual and managerial factors in incentive effectiveness. Implications: Findings suggest that transparent, performance-based incentive policies can optimize workforce productivity in small businesses, providing insights for managerial decision-making in similar organizational settings.
Highlights: 

 

  • Financial incentives are the primary driver of employee productivity, showing a significant positive impact, while non-financial incentives have a smaller but still notable effect.

  • Job satisfaction alone does not significantly influence productivity, highlighting the need for well-structured incentive programs rather than relying solely on workplace satisfaction.

  • Transparent and performance-based incentive policies are crucial, especially in small businesses, to ensure fairness, motivation, and sustained productivity improvements.

 

Keywords: Financial Incentives, Non-Financial Incentives, Job Satisfaction, Employee Productivity, Multiple Linear Regression.

Article View

Downloads

Download data is not yet available.

Metrics

No metrics found.

References

  1. D. Alamsyah et al., "Salary, Incentives, and Employee Productivity," Airlangga International Journal of Islamic Economics and Finance, vol. 7, no. 2, pp. 89–98, 2024, doi: 10.20473/aijief.v7i02.64081.
  2. O. Bandiera, I. Barankay, and I. Rasul, "Social Incentives in the Workplace," The Review of Economic Studies, vol. 77, no. 2, pp. 417–458, 2010, doi: 10.1111/j.1467-937x.2009.00574.x.
  3. F. v. d. Brand et al., "Effect of a Workplace-Based Group Training Programme Combined With Financial Incentives on Smoking Cessation: A Cluster-Randomised Controlled Trial," The Lancet Public Health, vol. 3, no. 11, pp. e536–e544, 2018, doi: 10.1016/s2468-2667(18)30185-3.
  4. P. Chatzoglou, A. D. Diamantidis, and A. Karras, "Unveiling Employee Motivating Factors During Economic Crisis Periods: A Structural Approach," Journal of Occupational and Organizational Psychology, vol. 97, no. 3, pp. 1148–1165, 2024, doi: 10.1111/joop.12507.
  5. L. Chen et al., "Transformational Leadership, Social Capital and Organizational Innovation," Leadership and Organization Development Journal, vol. 37, no. 7, pp. 843–859, 2016, doi: 10.1108/LODJ-07-2015-0157.
  6. E. Deserranno, G. León, and F. Witoelar, "When Transparency Fails: Financial Incentives for Local Banking Agents in Indonesia," The Review of Economics and Statistics, pp. 1–45, 2023, doi: 10.1162/rest_a_01359.
  7. A. Fatah and Y. Suhandini, "The Effect of Employee Incentives and Rewards on Employee Performance," Jurnal Apresiasi Ekonomi, vol. 7, no. 1, pp. 46–55, 2019, doi: 10.31846/jae.v7i1.136.
  8. G. Ganbold et al., "The Effects of the Incentive System on Employees’ Entrepreneurship and Innovation Performance: Moderating Effect of Locus Control Focused on the Private Hospitals," Journal of Advanced Researches and Reports, vol. 1, no. 3, pp. 83–90, 2021, doi: 10.21742/jarr.2021.1.3.11.
  9. F. Ghasemi et al., "Surprising Incentive: An Instrument for Promoting Safety Performance of Construction Employees," Safety and Health at Work, vol. 6, no. 3, pp. 227–232, 2015, doi: 10.1016/j.shaw.2015.02.006.
  10. I. Ibrahim and N. Z. Abiddin, "The Impact of Incentives on Employee Productivity: Review of Past Literatures," Journal of Business Administration Research, vol. 12, no. 2, p. 19, 2023, doi: 10.5430/jbar.v12n2p19.
  11. E. Koch et al., "Incentives for Plasma Donation," Vox Sanguinis, vol. 119, no. 8, pp. 775–784, 2024, doi: 10.1111/vox.13644.
  12. C. Martinsson et al., "What Incentives Influence Employers to Engage in Workplace Health Interventions?," BMC Public Health, vol. 16, no. 1, 2016, doi: 10.1186/s12889-016-3534-7.
  13. S. J. Mfikwa, B. Kisawike, and B. Golyama, "The Role of Financial Incentives on Employees’ Performance in Tanzania: A Case of Iringa Municipal Council," Asian Research Journal of Arts & Social Sciences, pp. 129–140, 2022, doi: 10.9734/arjass/2022/v18i330349.
  14. M. Mulyati et al., "Effect of Human Resources Quality, Performance Evaluation, and Incentives on Employee Productivity at Raharja High School," Aptisi Transactions on Management (ATM), vol. 7, no. 1, pp. 1–7, 2022, doi: 10.33050/atm.v7i1.1732.
  15. B. Narpati, K. I. Meutia, and E. P. Ningrum, "The Role of Giving Incentives and Workload for Employees of Bank Perkreditan Rakyat Bekasi Branch," Jurnal Ekonomi Dan Statistik Indonesia, vol. 2, no. 1, pp. 35–43, 2022, doi: 10.11594/jesi.02.01.05.
  16. H. D. Nguyen, T. N. Chau, and Q. Huynh, "The Impact of Team Support, Financial Incentives and Public Sector Motivation on Employee Motivation: An Empirical Study of the Public Sector in Vietnam," Asia-Pacific Journal of Business Administration, vol. 16, no. 5, pp. 1166–1181, 2023, doi: 10.1108/apjba-09-2021-0460.
  17. G. K. Putri and M. R. K. Umam, "The Effect of Incentives on Employee Productivity With Teamwork as a Moderation Variable," 2024, doi: 10.4108/eai.18-11-2023.2342573.
  18. D. F. Rahmadi and S. G. Partiwi, "The Effect of Financial Incentives, Organizational Commitment, and Job Satisfaction on Employee Performance," Iptek Journal of Proceedings Series, vol. 0, no. 3, p. 153, 2021, doi: 10.12962/j23546026.y2020i3.11195.
  19. S. P. Robbins and T. A. Judge, Perilaku Organisasi, Jakarta: Salemba Empat, 2019.
  20. G. M. Shah, N. A. Memon, and G. Tunio, "Determining the Effect of Financial and Moral Incentives on Job Satisfaction of Teachers at Higher Education Institutes," International Journal of Management Research and Emerging Sciences, vol. 11, no. 4, 2021, doi: 10.56536/ijmres.v11i4.160.
  21. E. Starikov, M. Evseeva, and I. Tkachenko, "Digital Technologies in the Smart Production Management System," SHS Web of Conferences, vol. 93, p. 1024, 2021, doi: 10.1051/shsconf/20219301024.
  22. W. H. Wu et al., "Development and Evaluation of Affective Domain Using Student’s Feedback in Entrepreneurial Massive Open Online Courses," Frontiers in Psychology, vol. 10, 2019, doi: 10.3389/fpsyg.2019.01109.
  23. G. v. Zyl, "The Impact of Incentive Schemes on Employee Productivity in the South African Workplace," Journal of Economic and Financial Sciences, vol. 8, no. 2, pp. 633–647, 2015, doi: 10.4102/jef.v8i2.113.