Is Higher Pay a True Employee Productivity Motivator?

Motivating employees is no easy task. Often times, there isn’t a cut-and-dry solution because there are a lot of factors to consider, from what’s going on inside the company to what’s going on with each individual employee. It can be easy to buy into a one-size-fits-all answer for how to motivate employees or to think that one major change will turn things around because it’s the simple. If just one adjustment, such as increasing employees’ pay, were all it took, we wouldn’t find it as challenging to motivate our workforce. But the truth is, employee motivation is complex.

Although higher pay alone is not an instant fix, the question of whether or not it is a motivator remains. On the surface, most people, including both employees and those in leadership, would say certainly say it is but it’s not as simple as an across the board “yes.”

What the statistics say

Many studies have been conducted to look at what employees say is the most important motivator for them. In nearly all these studies, employees do not rank a high salary as their biggest motivator. For instance, the Federal Reserve Bank of Boston conducted an economic study that revealed that engagement is much more motivating to employees than a high salary and actually found that big financial rewards for employees doing jobs that require cognitive skills brought about poorer performance. Consistently, research shows that praise from a supervisor, recognition and attention from company leadership and the opportunity to be a leader are the top motivators.

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However, pay for performance, increased salary and other additional compensation do typically fall right below the three top motivators, showing that while pay is a motivator, it’s not the most important thing to employees. The bottom line is that what you pay employees matters, but it’s not the be all and end all.

What works

Knowing that employee pay is not the most important motivator is not an excuse for not focusing in on employee compensation. Competitive compensation helps recruit, retain and to a certain extent, motivate employees. So if it’s not all about higher pay but compensation is an important factor, what moves do you make to motivate your workforce? Well, it’s all about how pay fits into the bigger picture, both in the compensation area and beyond.

Related: Find out how to pay for performance with the PayScale whitepaper, “Strengthen the Link Between Pay and Performance.”

Your salary offerings should be comparable to industry and regional standards, but once you have established that foundation, you may want to beef up your total compensation package before raising pay just to motivate employees. Incentive bonus options can be incredibly motivating, as can stock and other investment options. Outside of compensation, there is an almost endless number of ways to motivate, from traditional to creative, such as these five proven ways. It’s also vital that you’re viewing employees as an investment. When it comes down to it, your company has a much greater chance of having a motivating workforce when the actions you take reflect what is mutually beneficial for the company and its employees, from nurturing talent to providing a work environment that understands that employee pay is just one part of the motivation equation.

What have you found to be motivational to your workforce? Let us know in the comments section below.

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