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Classification or types of rewards: rewards or incentives can be classified into:
1. Direct compensation, and
2. Indirect compensation
Direct compensation: includes the basic salary or wage that the individual is entitled to for his job, over time work and holiday premium, bonuses based on the performance, profit sharing and opportunities to purchase options etc.
Indirect compensation: includes protection programmes (insurance, plans, pensions), pay for time not works, services and perquisites. But these are maintenance factors rather than reward components. Since they are making available to the all employees, irrespective of performance, they will tend to retain people in the organization but not stimulate then to greater effort and higher performance. Some -times, the rewards are also termed an intrinsic rewards and extrinsic rewards. The former are those that an individual receives for himself. They are largely a result of the job that the worker does. The techniques of job enrichment, shorter work weeks, flexible work hours, project structures, and job rotation can offer intrinsic rewards through providing interesting and challenging jobs, and allowing the worker greater freedom.
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