Does Compensation Motivate Employees?

How can I motivate, engage and retain employees? This is the million-dollar question faced by most managers today.

With the competition for top talent heating up, figuring out a way to keep your best people motivated and productive at work is rapidly becoming one of the top priorities for employers. Many employers believe that an excellent compensation package holds the key to employee engagement and motivation.

Effects of Compensation on Employees

According to studies, compensation packages have a huge impact on an employees’ level of engagement. High compensation provides employees with a sense of satisfaction from their job and incentivizes them to perform better (especially when compensation is directly related to job performance). On the contrary, studies have also shown that low compensation hinders employee motivation and performance. Overall, compensation positively affects employees in one or more of the following ways:

  • Job satisfaction
  • Retention
  • Prospective recruitment
  • Work productivity

While compensation is important in engaging employees, it will not achieve its maximum potential when placed in a vacuum. Companies need a good plan and execution strategy to truly allow compensation to fulfill its maximum potential.

How to Maximize the Potential Benefits of Compensation

An effective compensation package stems from good compensation planning. Traditionally, compensation planning is done on spreadsheets (which is far from the most effective way.) Instead, managers should consider integrating compensation management software into their HR department. Such software will allow managers to:

  • Simplify calculations
  • Eliminate the need for spreadsheets
  • Create better visibility and compliance
  • Offer better decision support
  • Reduce costly errors associated with spreadsheets

After the plan has been created, effective compensation management software helps communicate the plan to the employees so that they understand the details of the package.

HRsoft – The Leader in Compensation Management

HRsoft is a leading provider of compensation management solutions for strategic HR departments. For more information on our compensation management software, COMPview click the link below!

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