How does salary affects employees motivation?

Hello!

How much should people earn? Even if resources were unlimited, it would be difficult to stipulate your ideal salary. Intuitively, one would think that higher pay should produce better results, but scientific evidence indicates that the link between compensation, motivation and performance is much more complex. In fact, research suggests that even if we let people decide how much they should earn, they would probably not enjoy their job more.

Even those who highlight the motivational effects of money accept that pay alone is not sufficient. The basic questions are: Does money make our jobs more enjoyable? Or can higher salaries actually demotivate us?

Let’s start with the first: does money engage us?

The results indicate that the association between salary and job satisfaction is very weak. The reported correlation (r = .14) indicates that there is less than 2% overlap between pay and job satisfaction levels. Furthermore, the correlation between pay and pay satisfaction was only marginally higher (r = .22 or 4.8% overlap), indicating that people’s satisfaction with their salary is mostly independent of their actual salary.

In addition, a cross-cultural comparison revealed that the relationship of pay with both job and pay satisfaction is pretty much the same everywhere (for example, there are no significant differences between the U.S., India, Australia, Britain, and Taiwan).

These results have important implications for management: if we want an engaged workforce, money is clearly not the answer. In fact, if we want employees to be happy with their pay, money is not the answer. In a nutshell: money does not buy engagement.

But that doesn’t answer the question: does money actually demotivate? Some have argued it does, that there is a natural tension between extrinsic and intrinsic motives, and that financial rewards can ultimately depress or “crowd out” intrinsic goals (e.g., enjoyment, sheer curiosity, learning or personal challenge).

Despite the overwhelming number of laboratory experiments carried out to evaluate this argument — known as the overjustification effect — there is still no consensus about the degree to which higher pay may demotivate.

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. Of course, that doesn’t mean that we should work for free. 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.

Read the full article with the research in:
https://hbr.org/2013/04/does-money-really-affect-motiv

Best!

Talented employees stay because they are paid well, appreciated, listened to, promoted, involved in decisions, mentored and challenged. It is a combo of all of theses and a talented employee will not be staying long if their present employer cant see that they are important. Also I have found for many if you know you are underpaid many will do just what the job desciption requires and maybe a little bit more but thats just before giving notice to a place that was a better fit that knew how to treat their employees right.

For me it's about making an impact, enjoying my work and being challenged. I work in the pharmaceutical business so finding medicines that help to cure diseases and/or improve patients lives is on the top of my motivation list.

Hi Abdulwahab,

I've worked in both hourly & salary positions. In working my salary position currently it gives me a piece of mind knowing exactly what I'm going to be getting paid which can prepare me for any financial situations that might arise. With that being said, I definitely feel motivated since my salary took place when I got promoted from a solutions manager to a general manager. Most salary paying jobs average at $45,000 per year for a 40 hour work week. Please reach out if you have any additional comments I may have missed.