The Impact of Compensation On Employee Behavior

Compensation can have dramatic effects on employee behavior and adequate compensation can lead to great positive outcomes for organizational performance and conversely sup par compensation can lead to negative performance metrics for an organization. According to New City Insurance, “Fair compensation and benefits can lead to greater job satisfaction, meaning employees are happy in their job position and are less likely to want to move jobs. Not only does this result in a lower employee turnover rate but it can also make certain positions in the workplace appear more favorable among employees. When employees value their position, they are more likely to feel motivated.”

Does Compensation Really Motivate Employee Performance? - Recognize

My Experience With Compensation and Personal Behavior

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One of my first jobs was working in the food industry and it was a great introductory job and something that helped me earn money during the summer. However, I was only earning minimum wage plus tips and did not have much upside for any promotions or pay increases. Due to this I quickly lost any motivation I had for the job to work hard, do well, and be productive. I knew that I did not want to work this type of job for the rest of my time in high school and so I quickly started re-evaluating my opportunities to decide on a new job during the summers. I finally settled on lawn care and worked toward starting my own business and investing in equipment with the money I was making from my restaurant job. I quickly started putting all of my effort into this new business and just did enough to get by with my job that I was working. After I had created enough recurring clients to make a tremendous amount more monthly than I was making with my other job I put in my two weeks notice to leave my job. I didn’t leave this job due to a lack of good management, or anything negative about the company. It was directly related to the lack of compensation and promotion opportunities that led me to leave the job. I made the right decision and was very much more motivated and happy making much more money in my new entrepreneurial venture. Compensation is not always the only component of what makes an employee happy in a job, but it is a huge contributing factor in keeping employees happy and motivated.

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New City Insurance. (2022, October 24). How compensation & benefits related to motivation. New City Insurance.,appear%20more%20favorable%20among%20employees.

Gallo, A. (2020, September 10). Most people have no idea whether they’re paid fairly. Harvard Business Review., S., & Strom, S. (2014, July 4). Paying employees to stay, not to go. The New York Times.

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