Does Earning More Money Impact Job Satisfaction?

by Diana Bailey - July 4, 2019

How often have you heard someone say: “Oh, I love my job, mainly because I make a lot of money”? Salary is normally not the first thing that comes to mind when engaged employees talk about their jobs. It is rather something along the lines of “great colleagues”, “amazing leadership”, “they’re paying for my further education”, or “awesome culture”, right? Surely a good salary is the basis for every engaged employee and their job satisfaction, but it’s not going to be enough to keep them at your company in the long run. The myth that high salary equals high engagement is only one of many that surround the field of employee engagement and we are going to debunk this one today.

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A report last year by The Conference Board showed that only half (51%, to be exact) of the 1,500 U.S. employees who responded to their study feel a general sense of satisfaction with their jobs. If that sounds bad, compare it to the Employee Job Satisfaction and Engagement Report published by the Society for Human Resource Management (SHRM) in 2016, which found an overall satisfaction rate of 88%, and it’s downright abysmal.

We’re not here to scare you, so much as to show how volatile employee satisfaction is in general, and how you can more effectively manage them to get a firmer grip on your business’s turnover rate. Back in 2016, the SHRM report found that the improving economy was enabling employers to invest in raises and benefits for their employees. In addition, a stabilizing job market allowed employees to seek out opportunities that interested them, instead of settling for whatever they could get.

open office space

While these factors might make it sound like you’re powerless to manage your employees’ satisfaction, nothing could be further from the truth. They simply allowed businesses to pay a little more, and to fill jobs with the right workers. Motivated employers, meanwhile, have long known that employee satisfaction is a long term investment, treating it as a boat that’s only gently rocked by the changing tides of the economy and labor market. And these employers reap the benefits, as good employees are of course any business’s greatest resource. Happy employees are more loyal, devoting themselves to their company’s success because they feel themselves to be a part of that success. They’re more productive, leading to increased profits. And, of course, they stick around, reducing costs associated with turnover and allowing you to recruit better talent and maintain the quality public profile that goes hand-in-hand with spreading goodwill.

Here’s where it gets complicated.

“If you work just for money, you’ll never make it, but if you love what you’re doing and you always put the customer first, success will be yours.” ― Ray Kroc

At its heart, the major problem with maintaining employee satisfaction is twofold: For one, employees are people, and people grow complacent. Given enough time, that complacency turns to restlessness and an urge to seek upward momentum. The easiest salve for that itch tends to be a raise and/or promotion, as these two rewards represent real progress in any employee’s career trajectory. The second issue? Employees will always feel that they are worth more than they earn. Let’s dissect and tackle these in order:

meeting room discussion

Complacency isn’t exactly boredom, but they’re pretty clearly related. Money is obviously important, and you should absolutely be paying your employees at or above market rate for their position and skills. While not doing so might feel like you’re getting a bargain, that feeling will be short-lived if they’re not being compensated in other ways that will keep them from seeking out greener pastures. For those businesses who have committed to paying their employees fairly, the problem becomes maintaining engagement. When organizations find ways to keep their employees interested, day in and day out, those employees are much less likely to grow restless and seek out promotions and financial compensation. We’ll get to this below.

As far as your employees’ worth goes, the conventional answer is that workers are worth their market rate. Another, better answer might be that they’re worth their market rate, plus whatever you feel their value is to your organization. But your staff, of course, is less likely to see it that way. At heart, workers will always see their day as a series of tasks that create outsize value for the company, and their salary will typically seem small in comparison to that value creation. And they’re not necessarily wrong! Which is why it’s important to keep your employees’ job satisfaction high in myriad other ways, so that they focus on how much they enjoy coming into the office every day and doing their job, rather than on an arguably unobtainable (inasmuch as we assume you’re in business to make a profit) estimation of their own value to your company. How should you go about doing that? We’re glad you asked.

man in suit

Job Satisfaction Best Practices

Pay fair

While these tips fall largely within the theme of “ways to promote job satisfaction besides salary increases,” paying your employees correctly is definitely the elephant in the room. Notice we say “correctly”, as opposed to “fairly.” This is because what seems fair to you might seem insulting to your employees, and vice versa. Here’s an example: a new employee, Beth, has been working at your company for four years. Well-educated but young, she started out as a full-time intern making a low starting salary of 15€/hour, and has since moved up quickly to become a highly-valued, highly-skilled member of her team making 45k/year.

The problem is, Beth’s salary is still 10-15k/year below market rate for her position, even within your company. The dichotomy here is easy to recognize: while Beth’s point of view is that she could get as much as a 30% raise if she did a little job hunting, you might feel that she ought to be happy having experienced a massive pay hike in just a few years.

“True motivation comes from achievement, personal development, job satisfaction, and recognition.” ― Frederick Herzberg

The answer? You’re both right, but unfortunately your position is much more precarious. If Beth leaves, you’ll be stuck paying market rate to her replacement. Or, you can hire from within, continuing the cycle, but risking a hit to employee morale by teaching them that your decisions are based on money alone. What can help here is to remember that while salary is incredibly important, there’s a lot more keeping your employees around than just money. Keeping that in mind, consider offering solutions like a graduated pay increase (“let’s get you up to your target salary over the next two years”) or an immediate compromise (i.e. an on-the-spot 7,000€/year raise). Beth will feel respected, and you’ll be getting a relative bargain in the process.

Going forward, there are some steps you can take to evaluate your pay practices on an employee-by-employee basis. For one, keep an eye on the market rate for your employees. Companies like Glassdoor make this easy by posting average pay for some positions, but of course you can also just take a look at employment ads that include salary offers. If your pay falls short of these indicators, consider whether you offer benefits like profit sharing that positively impact your pay rates. Furthermore, if you’re not offering, at minimum, a yearly salary increase to each and every employee in your company, you’re underpaying them. Regardless of what their actual salaries are, inflation does exist, and your employees deserve a cost-of-living increase of roughly 2-6% percent (depending on where your company is situated) based on their loyalty and performance alone. Lastly, consider instituting a policy of open communication when it comes to your company’s pay structure. Your staff will feel more at-ease with their salaries if they understand how it’s calculated.

Practice transparency

Survey your workers frequently and openly about their engagement levels, job satisfaction and related topics, and let them know how you intend to use that information for their benefit going forward. Moreover, your employees will be more satisfied with their positions if they can see clearly how their work contributes to your company’s goals. When workers feel that what they do is disconnected from all but the most immediate results of their labor, it’s easy to understand how they might become restless and look for gratification elsewhere. Being open and honest about company policies, plans, and practices can help your employees feel an invaluable sense of pride in their work.

Careers, not jobs

Employees who don’t feel that they have a future within your company, even if it’s just because they’re unaware of development opportunities, are more likely to look for that future somewhere else. Provide mentoring programs and frequent training opportunities, and discuss with your employees once or twice a year where they see their career headed within your organization and how to succeed in those goals.

“A highly paid, highly motivated employee who is not allowed to work with his full potential is like a Ferrari which is not allowed out of the garage.” ― Charbel Tadros

Be grateful

A kind word goes a long way. Show gratitude for the hard work your employees put in by thanking them for their time and celebrating their successes. They are, after all, the key to your company’s profits. Pay increases are nice, but building a real relationship is the truest way to engender loyalty, and you can’t put a price tag on feeling appreciated.

Keep it friendly

Encourage the development of friendships amongst employees with perks like group lunches, frequent after-work drinks, or even a reading club. Having friends in the office makes people excited to go to work each day, so promote healthy office relationships by checking here for more ideas.

Work on work-life balance

Communicating with your employees about their lives outside the office is obviously an important part of being a good boss. That communication goes hand-in-hand with a responsibility to make sure that your organization is creating a positive experience inside and outside the office for your staff. Ideas such as flex-time, work-from-home opportunities, including a “plus one” for their business travel, and gradually increasing employees’ paid leave along with their yearly cost-of-living raises, are all great ways to encourage a healthy work-life balance.

“There are countless studies on the negative spillover of job pressures on family life, but few on how job satisfaction enhances the quality of family life.” ― Albert Bandura

Employee satisfaction isn’t a one-size-fits-all issue, so look at these as a starting point for a much bigger consideration of your company’s needs and your employees’ happiness. For more ideas about how to give your team more incentive to remain with your company, check out our tips for workplace benefits that fit every office budget. And in addition, we also provide employee retention tips that won’t break the bank.

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