Pay is one of the most important factors affecting employee satisfaction and retention because “it’s not just a number; it’s an emotional measure reflecting how valued an employee feels by their employer” (Smith). There are many other factors such as a positive culture and effective management that also play a large role in employee satisfaction. However, at the end of the day, most of us show up to work because we need to make money to live. So, if we feel that we are not making enough money to support the life we want or, if feel we are not being paid what our time is worth, we are likely to be dissatisfied with our job and want to find a new one.

During my time working as HR in my family company, I have had the opportunity to experience first hand how compensation can motivate people. For example, there were several employees that we hired in 2020 for some low-skill, entry level positions. At the time we hired them, we were paying them just above what was considered a living wage for our area at that time and, for most of them, it was several dollars more than they had been making at their previous jobs. Since then they have all gotten several raises. However, at the rate inflation has risen over the past few years and the way the labor market has gotten so competitive, we had to raise the starting wages for that position by several dollars. We made the mistake of advertising an open position at the same level as several of our employees were already working with a starting rate that was about one dollar an hour more than they were currently being paid. The existing employees found out about this and were, understandably, upset. So, to remedy the situation, we quickly raised them to above the new starting pay. This was a great reminder of the importance of equity and fairness when it comes to making compensation-based decisions.

Smith, Dave. “Most People Have No Idea Whether They’re Paid Fairly.” Harvard Business Review, 2015