Extrinsic rewards are those which are external or separate from the job itself and depend on the decision of others. Examples of extrinsic rewards are salary, benefits and working conditions which are usually beyond the control of workers and are determined by managers.

Intrinsic rewards relate to the concept of job satisfaction and include satisfaction associated with the successful accomplishment of a particular task or status associated with a certain job or position. Intrinsic rewards are therefore psychological rather than material.

A well-motivated workforce can provide several advantages:

• Increased productivity (amount produced per employee). This can lead to lower unit costs of production and so enable a firm to sell its product at a lower price.
• Lower levels of absenteeism as the employees are content with their working lives.
• Lower levels of staff turnover (the number of employees leaving the business). This can lead to lower training and recruitment costs.
• Improved industrial relations with trade unions.
• Contented workers give the firm a good reputation as an employer so making it easier to recruit the best workers.
• Motivated employees are likely to improve product quality or the customer service associated with a product, etc
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