Pay satisfaction is a much narrower construct than job satisfaction. However, pay satisfaction is also
an important variable that is linked to some rather significant organizational outcomes. For
example, some evidence suggests that dissatisfaction with pay may lead to decreased job
satisfaction, decreased motivation and performance, increased absenteeism and turnover, and more
pay-related grievances and lawsuits (Cable & Judge, 1994; Gerhart & Milkovich, 1990; Huber &
Crandall, 1994; Huselid, 1995; Milkovich & Newman, 2002).
4 Strategies To Boost Pay satisfaction
1. Institute a Standard Process
Institute a standard process for evaluating pay rates, adjustments (cost of living, market, and merit),
and incentive/pay for performance practices on an annual or bi-annual basis. Organizations do this
by using compensation surveys and/or job evaluation to evaluate pay rates. Whatever the method
used, it’s recommended that you be consistent and use the same method each year.
2. Analyze How Pay Rates Differ
Analyze how pay rates differ – especially among individuals in the same jobs. If pay rates are
differing by valid factors such as performance, education, skills/competencies, and/or other job-
related variables, this is acceptable. If they are not varying by valid factors (race, gender, and other
extraneous variables), this could increase your liability so take steps to equalize pay rates and
reduce differentials. Even if your policies prohibit discussion of pay rates, realize that talk does
happen in the workplace and employees will be constantly comparing how they are paid relative to
others. The danger is to have differentials that cannot be accounted for by performance and job-
3. Use Market Information Cautiously
Be cautious when using market information to base adjustments and increases. Realize that if your
organization had an extremely profitable and successful year but the market is showing a low
adjustment being given by other employers and you choose to provide a low market adjustment,
employees may feel a disconnect. We’ve seen this happen and it can decrease pay satisfaction. It’s
recommended that you consider internal organizational factors in addition to the market as
organizations are performing differently in this variable market.
4. Develop a Communication Strategy
Develop a communication strategy that includes managers. Employees need to know how their pay
rates are being determined at the most basic level (comparing pay rates to the market, what markets
you’re using, how job evaluation is conducted, when pay rates are evaluated, how often, etc.) and
what the organization’s pay philosophy is (at market, above market, etc.). Be transparent about the
process, because most employees will fill in the blanks with their own perceptions, ideas, and
opinions if you don’t communicate fully.
While pay will likely never be your highest scoring item on an employee survey and there will
probably always be some level of dissatisfaction prevalent among employees, these are strategies
that many employers use to successfully enhance employees’ pay satisfaction.