Compensation as a Motivation Tool

Subject: Employee Management
Pages: 2
Words: 662
Reading time:
3 min
Study level: Bachelor

CEOs are constantly trying alternative solutions to increase employees’ productivity. The most obvious way to get a person to work harder is monetary compensation. The technique implies a worker’s understanding of the need to spend their efforts and what rewards they will receive. Different payments are great incentives to motivate and keep employees, but they are not the only way and can have adverse effects.

Staff members’ motivation is the key to increasing their productivity. The primary reason people get a job is their salary. However, companies need to introduce additional bonuses to attract and keep specialists. A system of benefits can motivate employees within the enterprise, moral encouragement, professional development, and subsequent career advancement. These parameters focus on results, which Key Performance Indicators can quantify. According to Klimaitienė et al. (2020), the KPI system “should contain balanced and harmonious criteria, thus highlighting the importance of the relationship among all the researched indicators of the enterprise” (p. 223). An adequately built motivation system contributes to business prosperity.

Compensation is the primary way to help an employee perform better. It changes a person’s behavior for the better by providing incentives. The reimbursement system is logical since the more effort a person puts in, the greater is their reward. It can include many items, such as sales commission, overtime wages, recognition or merit pay, benefits (insurances, retirement), and other non-cash benefits. However, such a policy can lead to burnout and decreased productivity. According to a study by Lee (2020), “the impact of wage increases on emotional exhaustion was 0.378, and its effect on work was 0.201” (p. 1166). Compensation motivates behavior and encourages employees to work harder but can lead to burnout.

The critical elements of motivation are intensity, focus, and persistence because these factors can reflect a person’s contribution. Passion expresses the employee’s involvement in the entire work process and reflects how much effort a person is putting into it. The focus should be based on the organization’s significant needs. For example, a person may invest much effort in unimportant things, which means the wrong direction. Perseverance is a factor without which one cannot achieve success. It expresses the person’s ability to make efforts in the right direction over a long period. Compliance with the motivation elements helps an ordinary employee to move up the career ladder.

Compensation is a distinctive feature of every organization and plays a vital role for the applicant when choosing a place to work. A person looking for a job more often pays attention to the bonus system to get significant development opportunities. An employee wants to get more, so “for holding great workers in the association, it is crucial to spur them conveniently” (Neeraja & Niranjan, 2021, p. 695). Compensation is an excellent tool for attracting and keeping employees because the firm profits from the employees’ excellent work.

The incentive system should be clear and accurate for each employee to understand what should be done to receive bonuses. It means the need to highlight specific actions and the type and amount of compensation for them. Examples of employee behaviors that need to be rewarded include but are not limited to delay after work to complete the daily plan, holidays’ work, and fulfilled sales plan. People must understand that the employer values them and cares about the general well-being. The staff gets moral satisfaction from the performed duty and the bonuses joy.

Compensation is one of the best encouragements to motivate employees for outstanding achievements. A set of various bonuses inspires workers, for the sake of which they work for the result and are assessed through KPI. Compensation changes a person’s behavior, while a person tries to work harder to achieve greater rewards. Elements of motivation help managers and employees form a rational idea about what and how to do. The bonuses attractiveness helps to find recruits and keeps personnel motivated for achievement. Compensation has a positive effect on employee behavior and allows businesses and people to grow.


Klimaitienė, R., Derengovska, E., & Rudžionienė, K. (2020). Application of key performance indicators to improve the efficiency of monitoring of the organisation’s activities: Theoretical approach. Public Security and Public Order, 25, 218–233. Web.

Lee, H. W. (2020). The pros and cons of increasing the proportion of performance pay: An evidence from south korean public enterprise. Public Performance & Management Review, 43(5), 1150–1173. Web.

Neeraja, MS. B., & Niranjan, MR. P. (2021). A study on factor influencing employee motivation in work environment. Journal of Contemporary Issues in Business and Government, 26(02), 691–696. Web.