Every person has different motivations for working and the reasons for working vary for each individual as a person. But let’s be honest, the bottom line is this – most of us wouldn’t work if we didn’t need the money. So, Money is an important motivator in any employment relationship.
Salary, remuneration, bonuses, compensation, benefits, aka money is what pays the bills and allows us the lifestyles and goals that motivates us to do what we do. It provides us and our families with housing, food and clothes. It sends the kids to school, the teens to uni, the family on the annual holiday overseas somewhere and eventually, sets us on a comfortable retirement plan. While there are surveys that say money is not always a number one need for employees, to underestimate money’s importance as a motivator for people who work is an oversight.
According to a study conducted by Rihova, 2009 of Deloitte University, a well thought out and fair executive compensation system aligned with success in fulfilling the designated goals of a company is the basis of “social peace” in a company and surely motivates employees to deliver the required performance needed.
You can see in the linked diagram below where she illustrates how an employee’s compensation mirrors the employee’s skills, talent, capabilities and knowledge etc.; it shows the relationship between the employee and the wage that the employee receives. She notes that the proportion of individual wage components of the employee’s total rewards differs based on the type of job and job description. Similarly, the goals of individual employees differs depending on their position in the company’s hierarchy.
View the full diagram – Rihova, I. 2009, Motivation and Compensation, Journal of Financial Management, May issue
Do you have a pay philosophy?
A pay philosophy is a company’s vision and procedure with how it values and deals with its employees monetarily.
For example, a small company’s recruitment pay philosophy might be to pay a competitive base salary – it may not be such an aggressive one, but a salary comparable to what an employee could get somewhere else. Another company might offer below market base pay but have a signing bonus and also offer other incentive programs.
A consistent pay philosophy provides the company and the employee a frame of reference when discussing salary in negotiations. The goal of the pay philosophy is to attract, retain and motivate employees. In the private sector this might mean having a competitive pay philosophy. Whilst in the public sector in Australia today, a more well-rounded philosophy with a focus on work-life balance is more attractive. Employees need to see the connection with these pay philosophies to understand their value, which benefits the business as a whole – helping you retain employees that keep your business at its best.
There are many different thoughts and beliefs on ways to deal with salary, bonuses and remuneration discussions with your employees. What are your experiences with salary negotiations? Do you believe base rate is more important? Or do you feel bonuses hold more appeal to your employees?