Merriam Webster defines psychic income as rewards (as in prestige, leisure, or pleasant surroundings) not measurable in terms of money or goods but serving as an incentive to work in certain occupations or situations
Research in the field of behavioural economics reveals that this perceived irrationality is actually predictable and by understanding which button to push, managers can nudge their employees towards achieving organizational goals without adopting an expensive restructuring program or a tumultuous round of layoffs.
By including emotions as a factor in the decision making process we begin to understand that financial incentives have limitations as motivators to perform a given tasks. In other words people also give value to psychic income i. e. how the boss, the management or the organisation makes them feel.
This psychic income forms part of the decision process on how much effort to exert on a task, whether to indulge in behaviour that can harm the organisation, how to treat co workers etc.
If the workplace gives an employee positive feelings, or psychic income in terms of being valued or being included in important decisions, in addition to monetary compensation, the individual feels more motivated to work towards the organisational goals.
For organisations, this implies that managers need to value the emotional needs of employees, in addition to monetary incentives while structuring compensation, rewards and recognition strategy.