As different research shows that currently Performance-related pay (PRP) has been widely implemented in private organizations. However, the way of their implementation and the evidence for its effect on employee motivation remains questioned. This study examined the effect of performance-related pay on employee motivation. The main objective of this study was to identify the current performance-related pay system and to explore the effect on employee motivation at Fantu and Family Trade and Industry PLC. Further, the study is carried out to analyze the effect of financial and non-financial rewards on employee motivation of the organization. The study was carried out in all branches of Fantu and Family Trade and industry PLC located at Addis Ababa. The study was used triangulation approaches. Both primary and secondary data were applied as data sources. Primary data were collected by using questionnaires and face-to-face interviews. The findings of the study confirmed that performance-related financial and non-financial incentives have a direct strong and positive relationship with employee motivation, and performance-related pay is an effective system to motivate employees to work harder, as well as to deal with employees who have poor motivation. This study, therefore, recommends the management of the company should develop a financial and non-financial reward system to improve employee motivation, and especially the company give more emphasis on non-financial motivational factors to create an attractive and motivational work environment, and therefore organizational achievement