Influence of Compensation vs. Job Satisfaction

Compensation, work environment and other factors influence employee satisfaction. By balancing pay with other programs, such as career development opportunities, flexible work schedules and attractive surroundings, you can improve job satisfaction for your employees in a cost effective manner. This typically results in improved morale, reduced absenteeism, fewer conflicts on the job and increased productivity. Increased compensation alone doesn’t always lead to increased job satisfaction. In fact, sometimes a small increase can actually have a negative effect. By surveying employees on a regular basis, you can find out what they really want.


Both compensation and job satisfaction impact employee morale. Typically, the supervisor’s leadership style as well as the employee’s skill level and decision-making authority also affect an employee’s attitude toward his job. For example, when people work for an autocratic leader who makes all the decisions without consulting his staff, even if the compensation is high, job satisfaction and morale tend to be low. When people don’t feel empowered to contribute to the overall planning, organization and direction of the company, they typically don’t commit to the long-term success of the business.


When the workplace represents high levels of stress, unsafe conditions or uncertainty, even high levels of compensation may not compensate for the toll it takes on an employee’s personal life. Maintaining a healthy balance between work and home ensures that employees can come to work and manage job tasks with minimal distractions. Worker absenteeism costs the economy billions of dollars every year in lost productivity.


Low pay, a highly competitive atmosphere and poor working conditions contribute to job dissatisfaction. When people fear losing their jobs in a poor economy, they tend to distrust management and argue more with their co-workers as well. This typically leads to on-the-job disputes, which further reduces job satisfaction. Job responsibilities and related compensation, such as overtime pay, bonuses and raises, need to be stated clearly or employee satisfaction decreases and faith in management plummets. Management can mitigate this type of conflict in the workplace by describing a long-term plan and proposing interim steps to get through the current problems.


Productivity suffers when employee job satisfaction decreases. By providing interesting work and empowering employees to take charge of their own tasks, you can improve performance. However, providing individual rewards can undermine teamwork, creativity and innovation, so avoid this risk by also providing incentives for team awards. Incentive schemes typically positively impact job satisfaction and productivity, but monitor your programs to ensure there are no unanticipated ill effects.