Make Money Matter: Understanding Good Compensation at Work

A large number of recent studies on workplace motivation are driving us to think that money is too “overrated”. That is true, to an extent – especially in this day and age it is certain that you’ll need more than money to attract and retain talents. Workplace flexibility is one of many examples. But while we are in the right direction of exploring new ways to drive our employees, whether or not money is a good enhancer for work is still an ongoing debate. So let’s not bury the “money talk” just yet.

Everyone Wants Something Different

As we’ve mentioned time and time again, there are never “one-size-fits-all” solutions in a workplace. Knowing that employee behavior is very complex and diverse, how money is valued will also change depending on the employee’s background and needs. For instance, extrinsic rewards such as pay raises, bonuses, and benefits are most certainly stronger reinforcers for members who are focused on meeting the basic needs for survival. Contrarily, if you’re someone who already has your necessities of life met, you are more likely to crave intrinsic rewards in the form of meaningful relationships and a sense of purpose.

No Pay, No Way

No matter how much we enjoy our work, let’s be real – how many of us would be willing to keep doing our jobs if the employer were no longer able to pay us and instead we’re now full-time volunteers? Getting paid to do a job is the basic foundation of a professional work relationship. This makes money a crucial incentive for employees all around. In fact, 58% of workers stated money as the most important factor in choosing an employer, and is among the leading reasons why business professionals quit their jobs.

It is dangerous to underestimate what a dollar value can do to change the way our employees may perceive their jobs. The equity theory explains that people tend to maintain balance between the inputs they bring to work and the outcomes they receive from it. In the context of money, employees perceive they’re being treated fairly only when the ratio of their workload to their paycheque is equivalent to the average working population or other employees they work with. Understanding this concept is crucial for employers to make better compensation decisions.

Tips for a Good Compensation Plan

So, we now know that there is a connection between money and job performance. If we want our employees to be as productive as possible, we need to ensure that they’re being compensated fairly – starting from the very basics.

  • Do your research: You need to understand the job market to be able to come up with a number that makes sense. Is this role in high demand? How much are they getting paid on average? Sites like Glassdoor and LinkedIn contain a wide inventory of salary insights that will help you make better decisions.
  • Be transparent in your job postings: It’s not common practice to disclose salary information in job postings, but perhaps we should change that. Putting salary ranges in job ads may give employers a competitive advantage when trying to attract candidates. That’s because, according to research, most job seekers tend to look first at a position’s compensation and benefits before diving into the job’s required qualifications.
  • Set up proper criteria when evaluating employees: Come up with a set of fixed criteria when conducting annual job reviews. That way you can guarantee that no implicit bias will get in the way, and your employees are getting paid exactly what they deserve.

Money is Still Important

It is very unlikely that money alone can create lasting motivation. But good compensation may help your organization recruit and retain talents, boost morale, reduce turnover, increase loyalty, and in general achieve better internal equity where employees feel they are being rewarded fairly. Let’s not ignore the advantages money can bring to your business’s success. We all need it to thrive, after all.