Does Salary Impact Employee Engagement?

While money may not buy happiness, there is a certain amount that makes people feel more comfortable. This all relates to employee engagement. It’s believed that more money equals higher rates of employee engagement and workplace satisfaction. This may be true to a point, but not always the case. Below we break down what you need to know about salaries and employee engagement.  

The Salary Sweet Spot 

Life is all about balance, and employee salaries are no different. Sticking with research from Gallup, $75,000 is the salary sweet spot for employee engagement. In Gallup’s findings, if an employee has a household income less than $75,000 they are likely going to be thinking about making more money more often and will be stressed about getting their bills paid. The time spent worrying about finances or searching for a job that meets the employee’s salary expectations is time wasted on work. Additionally, employees are more likely to leave in search of opportunities that will give them this salary. One major exception to this is geography. For example, that $75,000 will stretch farther in smaller towns or smaller cities, versus somewhere very large and expensive like New York City. 

When Money Isn’t the Problem 

Eventually, money plays less of a factor in employee engagement. While employees are likely to be more engaged once they hit that $75,000 mark, don’t expect all employees to be engaged once they reach that level. Once an employee has this household income, a lot of their financial stress will go away, and they will be able to spend less time thinking about money and instead prioritize doing strong work. So, what happens when the money doesn’t keep employees engaged? When the money stops being the main factor, employees look towards things like their purpose, the company culture and if it’s a true fit for them, and feeling like their work is valued. The LinkedIn article references Maslow’s Hierarchy of Needs to understand employee engagement. The salary meets an employee’s basic need for survival, but after that, they are looking to move to the next level of self-actualization, such as producing valuable work that makes a difference.  

Some ideas to consider to boost employee engagement outside of salary include:  

• Clear career progression 
• Learning opportunities  
• Prioritize physical and mental health of employees 
• Employee recognition program  

Note: If you’re looking for other ways to apply Maslow’s Hierarchy of Needs to your small business, check out our series about managing cash flow and what to do if you can’t make payroll. 

Next Steps 

The good news is if you’re working with a small business budget, you don’t have to break the bank to boost employee engagement. You may just have to get creative in how you retain employees and ensure that they are happy at work.