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Does Salary Impact Employee Engagement?

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Stephanie Davis

“Money can’t buy happiness.” How often have you heard this saying, and how often have you heard the follow up along the lines of “maybe not, but I would be happier sitting at my beach house with a margarita in hand”? 

A paycheck laying next to a calendar and calculator.

Researchers have spent a lot of time understanding how money affects people, and at what point will they be happy. The same is applied to workers and how much money will make an employee engaged. 

In part one of our employee engagement series, we touched on what leads to disengagement. In this article, we are diving into how salary can affect engagement.

The Salary Sweet Spot

Life is all about balance, and employee salaries are no different. Sticking with research from Gallup shared by LinkedIn, $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 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 thinks 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 as a way 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.

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

Now that you know what employee engagement and disengagement is, and how money is a factor, our final post in this series is going to reflect on how to increase employee engagement and offer some tips on how to get creative if you can’t budge on salary.

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