Jason Lauritsen - Crushing talent dogma to free human potential

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How Does Pay Impact Employee Engagement?

I have a confession to make.

For years, I’ve been arguing that you can’t “buy” employee engagement with compensation. I was pretty certain of this fact.

I’d even gotten pretty skilled at explaining away the low scores on pay questions within employee engagement surveys.

“Pay items will always score lower.”

“Everyone wants to be paid more, no one will tell you they are being paid too much.”

No one ever argued with me. They were happy to be let off the hook because fixing pay is expensive.

Here’s the problem. I was wrong.

While what I said is technically true, it’s not the whole story.

I recently published a white paper titled, “Can you Buy Employee Engagement?” that was sponsored by Salary.com.  You can download it here.

As I dug into the research that’s been done into the linkage between pay and employee engagement, satisfaction, and well-being, I came to a new understanding and appreciation of the complexity that exists in our relationship with our compensation.

One thing became abundantly clear to me: the amount of money you make has an incredible impact on how much pay impacts your engagement at work. While this may not seem like an earth-shattering realization, I think you’ll be surprised when you dig into the paper.

Perhaps the biggest issue is the gap that exists for many of our lower-wage employees between what they are currently paid and what they need to actually have a living wage. The gap for some is pretty wide.

From the paper:

If you take Kansas City, Missouri as an example, a living wage for a single person with no spouse or children is considered to be $21,672 per year (or $10.42 an hour). For a single parent of two children, the amount is $53,668 annually (or $25.80 an hour). Both numbers are significantly higher than the minimum wage requirements in most states, including Missouri.

Making less than a living wage means needing help, picking up a second or third job, and cutting corners to get by. It translates to stress and doesn’t bode well for being engaged at work. Consider how “engaged” you would be at work if you were constantly worrying about having enough money to pay the bills or provide for your children.

For those who work full-time but aren’t being paid what constitutes a living wage, compensation plays a huge role in engagement. Being an engaged employee at work may not even be possible when survival and safety are your primary concerns.

Other research also supports this increased importance of pay on lower income earners. It shows that level of pay has a positive correction with emotional well-being and positive life evaluation up to an income around $75,000/year after which it loses its effect.

This reveals another possible complexity in the relationship of pay to engagement. The leaders and executives who are charged with making decisions about pay increases have often crossed over the $75,000 income line long ago and have a very different relationship with their level of pay than those whose engagement is most starkly impacted by it.

Bottom line: pay does impact engagement, but it’s a complicated relationship.  

In the paper, I share some ideas for how you can lean into this complexity and ensure that your compensation programs and strategies are helping drive engagement, not hurting it.

Check it out and let me know what you think.

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Jason Lauritsen