Why does pay motivate employees

Two often mentioned motivators are money and job satisfaction. We hear that better pay motivates employees to be more productive. But is there any truth to these sayings or are they just fictional beliefs? Anyone who has ever taken a course in social science has discovered that common sense beliefs are not always validated by scientific research.

In some cases, common sense beliefs are just plain wrong. This is not true. An overwhelming amount of research indicates that we tend to be attracted to people who are similar to ourselves. The only way to know if money and job satisfaction really influence productivity is to look at the results of scientific studies. Employee Satisfaction Survey — Fairness factors into many of the key topics associated with an employee satisfaction survey. This key factor will play a significant role in improving productivity, job satisfaction, and loyalty.

So, what does this have to do with employees? Employee behavior is also very complex. When we ask whether or not money is a motivator we are asking a very broad question that makes predicting behavior difficult. Money is a motivator to an extent. Money is a crucial incentive to work motivation. It is a medium of exchange and the means by which employees can purchase things to satisfy their needs and desires. It also serves as a scorecard by which employees assess the value that the organization places on their services.

Employees can also compare their value to others based on their pay. In addition to its exchange value, money also has symbolic value. John Stacey Adams, a behavioral and workplace psychologist, developed equity theory to explain this value. According to this theory, employees try to maintain equity between the inputs they bring to their job and the outcomes they receive from it.

This is compared to the perceived inputs and outputs of others in the organization. The theory states that employees perceive they are being treated fairly when the ratio of their inputs to their outcomes is equivalent to other employees they work with. Fair treatment motivates employees to exhibit fairness in their relationships with co-workers and the organization.

Motivated employees are also likely to be very engaged employees who will interact with communications from human resources departments in a positive manner.

It is therefore understandable, that human resources departments will show considerable interest in what the best ways might be to develop continuous and ongoing employee motivation. Many believe that employee compensation in the form of a salary is the best way to maintain a motivated workforce. But others believe this motivator has less effect or can even de-motivate staff. Instead, they place more value in other known motivators such as specific benefits, promotional opportunities and a company culture of empathy, recognition and job satisfaction.

In this article, we will examine salary and motivation and discuss the correlation to see if they are indeed two things that go hand in hand. A recognized study revealed that the average improvement to performance was greatest when money was motivating, at 30 percent. This far outperformed the other motivators it was compared to, including increased employee decision making and changes to the job role.

This will not come as any great shock to anyone, money is important, bills need to be paid and people have personal obligations that rely on them being paid accurately and on time every month. HR professionals certainly do not need to be reminded of the importance of the compensation systems and bottom-line earnings when it comes to job satisfaction and intrinsic motivation.

The connection between base salary and motivation is understandable really, if the person likes the salary they are on and it affords them a comfortable lifestyle , then there will be a strong motivation to continue with this lifestyle and maintain or improve these monetary rewards.

Many people will also feel that a high salary is a validation of their status and qualifications together with any effort and hard work they have put into their jobs in the past. Personal motivations form a great part of it too — higher salary enables you to afford more and better things and it is simply human nature to want this. Not everybody, however, is willing to put in the work to achieve this salary so motivation must be accompanied by actual job performance and results. Big salaries or pay increases are not handed out without careful consideration and unless you are quite lucky in terms of your timing, you will usually need to justify the reasons for the higher pay.

In line with this, it is essential to pay staff correctly and on time. Payroll software can be very helpful in guaranteeing this occurs, particularly for small business owners. Employees will always want their voices to be heard and they need to feel valued — a professional global payroll service that ensures they are paid on time and accurately every month goes a long way to reassuring them.

According to the Compensation Best Practices, 73 percent of organizations use a variable pay plan and incentive bonuses on top of base pay to reward hard work. Rather than expecting a higher salary alone to motivate a workforce, linking salary to job performance shows recognition of effort, improves transparency within the business and thus improves employee motivation.

See, for instance, a meta-analysis by Judy Cameron and colleagues. The authors analyzed real-world data from a representative sample of over , U. The results showed that employee engagement levels were three times more strongly related to intrinsic than extrinsic motives, but that both motives tend to cancel each other out.

In other words, when employees have little interest in external rewards, their intrinsic motivation has a substantial positive effect on their engagement levels. However, when employees are focused on external rewards, the effects of intrinsic motives on engagement are significantly diminished. This means that employees who are intrinsically motivated are three times more engaged than employees who are extrinsically motivated such as by money.

This is hard to test. Yes, that could be one reason; another could be that people who focus too much on money are preventing themselves from enjoying their jobs. This research also begs the question: Is this a money-focused, engagement-eroding mindset one that employees can change? Or is does it reflect an innate mindset — some people happen to be more focused on extrinsic rewards, while others are more focused on the task itself? And in theory, your mindset should be malleable — the brain is remarkably plastic.

We can try to teach people that if they focus on the task itself and try to identify positive aspects of the process, they will enjoy it more than if they are just focused on the consequences rewards of performing the task. Intrinsic motivation is also a stronger predictor of job performance than extrinsic motivation — so it is feasible to expect higher financial rewards to inhibit not only intrinsic motivation, but also job performance.

The more people focus on their salaries, the less they will focus on satisfying their intellectual curiosity, learning new skills, or having fun, and those are the very things that make people perform best. The fact that there is little evidence to show that money motivates us, and a great deal of evidence to suggest that it actually demotivates us, supports the idea that that there may be hidden costs associated with rewards.

We all need to pay our bills and provide for our families — but once these basic needs are covered the psychological benefits of money are questionable. But one size does not fit all. Our relationship to money is highly idiosyncratic. Indeed, in the era of personalization, when most things can now be customized to fit our needs — from social media feeds to potential dates, to online shopping displays and playlists — it is somewhat surprising that compensation systems are still based on the premise that what works for some people will also work for everyone else.

Other than its functional exchange value, pay is a psychological symbol, and the meaning of money is largely subjective.