Five Reasons Why A Pay Rise Isn't Always Everything

If you’re scratching your head and looking for ways to motivate your workforce to be the best they can be, it can be a bit of a gamble.

If you reach for the obvious – the employee pay rise – you might be putting your eggs in an entirely wrong basket altogether.  

Yes, it’s true, pay rises can be an effective way to ensure bums on seats, but they certainly shouldn’t be viewed as the answer to all your employee engagement problems.

Whether you believe it or not, simple recognition can have a much bigger impact on employee productivity and talent retention than the likes of cold, hard cash.

In fact, we’d even go so far as to say that you’d be better off giving your people a very public pat on the back instead. It’s something that costs nothing, but is all too often overlooked by companies seeking a quick fix to create employee wellbeing. 

Sodexo’s ‘Boost the Best Behaviour’ study gives a few useful clues into the ways employers can influence behaviour without having to dig too deeply into their pockets.

As Simon Sinek, author of ‘Start With Why?’ puts it, “When people are financially invested, they want a return. When they are emotionally invested, they want to contribute.”

So, can a pat on the back do a better job than an injection of cash?

Here’s why we think pay rises are yesterday’s performance incentive…


It’s those five little words, isn’t it? When an employee asks you, “Can I have a word?”.

At times like this you’d be forgiven for running for the hills, never to return. We exaggerate, of course, but you know that sinking feeling as well as we do.

Your employee is either about to resign, or, they’re about to ask for a pay rise – and/or resign.

Either way, you’ll be thinking, “It’s too late! The horse has bolted!”

You may have a sneaky feeling that your employee is likely to be disengaged and the issue is, how can you ensure that your pay rise will be worth it? It might be well deserved today, but you also want to know that it will lead to better performance where possible tomorrow.

Unfortunately, a request for a pay rise is often a sticking plaster for a disengaged employee to get more momentum behind their daily role.

They’re also mistakenly offered by employers as a way to get people to work harder or as an incentive to take on a big new project.

Yet Pay rises aren’t going to help with improving performance. According to research by the Cicero Group, commissioned by the O.C. Tanner Institute*, only 7% of employees said a pay increase would be highly effective at getting them to produce ‘great work’.

When an employee asks for a pay rise, it can be a signal that it’s time to revisit your employee rewards and recognition programme – as well as explore training opportunities and other ways to inspire your workforce.

If you can add discretionary effort to your management wins, the sky will soon be your limit. And that’s what a great employee engagement programme can give you.

You just have to know where to look.


Back to money for a second. When we turn everything into a cash transaction, we can actually demotivate employees.

Where money is involved, emotions usually aren’t. It’s simply a case of doing business. And that can leave staff feeling quite cold. It certainly won’t lead to better engagement at work in the long run.

As Sodexo’s ‘Move, Mould, Motivate: An Essential Guide to Employee Engagement’ study puts it, “motivation factors are important contributors to employee engagement and come in a variety of forms including creation, challenge, ownership, identity and pride.”

The issue is, a pay rise is fleeting. It’s a short-term ‘thank you’ but its initial impact is soon forgotten by the employee. Simply put, a pay rise doesn’t lead to an ongoing emotional connection with the company.

It simply approves what’s already happening.

Fenja Ziegler, Principle Lecturer in the School of Psychology, University of Lincoln, says, “Cash rewards can actually commoditise and devalue our achievements. People can lose their sense of accomplishment when led to believe they only did something for monetary gain. It can demotivate us.” Aha! That’s what we said.

If we had to put a finger on it, it’s this: money isn’t going to leap up and hug you. You might not want your boss too either, but a little of the ‘human’ touch isn’t going to do anyone any harm in creating greater employee engagement.

In fact, human behaviour has a lot to do with creating a more inspiring, positive workplace environment full stop. Here’s how…

Click Here To Get Your Free Ultimate Guide To Staff Incentive Programmes


Sodexo’s ‘Boosting Best Behaviours’ study reveals that we can learn a lot from behavioural economics. It tells us that money might make the world go around, but it isn’t always the best way to go about changing behaviour or improving performance.

The employer-employee relationship is certainly built on market norms.

You pay the money and people leave their cosy beds to come and work for you. But there are other forces at work here and these are ‘social norms’. It’s a bit like the feel-good factor versus the ‘computer-says-no’ attitude to engagement at work. 

Dan Ariely, Professor of Behavioural Economics at Duke University, explains that these “’warm and fuzzy’ norms are all about community, sharing and caring, helping people out, and returning favours.” Recognising success plays a key part here.

Social norms are a powerful tool in influencing employee behaviour. It’s this, not money, that drives reciprocity and leads to behaviour change across organisations who work towards improving quality of life for their employees.

We all know that whatever the situation in life, throwing money at the problem isn’t always a long-term fix.

So, if employee retention is a bit of a white elephant in your management room, it might be time to think beyond the pay rise.


A high staff turnover can cost businesses big. Pay rises might be viewed as the solution to talent retention concerns, but that’s simply not the case.

According to Oxford Economics, the cost to replace a single employee is a whopping £30,000. That’s with all the recruitment costs, lost productivity and time spent training up a new recruit.

“Keeping hold of top talent is really important for any organisation wanting to grow and thrive in a competitive market” says Sodexo Engage’s Director of Sales, Jonathan Bedford.

If you’ve got a high staff turnover, it can also be the sign of a disengaged workforce. No amount of money can fix a bored and frustrated employee. And it’s a well known fact that people leave managers not companies.  

That said, there can be many other valid reasons why people choose to leave their organisation – far reaching ones that go way beyond being underpaid.  

So, if an employee does hand in their resignation, that may be simply out of your control. Don’t beat yourself up about it. But if you’ve got a sneaky suspicion that you haven’t exactly valued their work enough recently, it’s time to get back to basics.


As Sodexo’s research shows, recognition goes a long way to keeping employees happy. Staff recognition schemes play an important part in improving performance and keeping people motivated and engaged.

You know it and we know it – but are your staff actually feeling it?

Natasha Omelchenko, Global Health and Safety Rewards Programme Director, Sodexo, says, “Reward in itself is not enough. I can reward someone with something tangible, but the way I thank that person in front of their team and make them feel truly special. That can be much more powerful.”

Yep, the all-important public pat on the back can do so much more to retain, inspire and motivate employees. Recognising success is where the smart money’s at.

What’s more, as Josh Bersin and Deloitte’s research found, “High recognition-culture organisations have 30% lower voluntary turnover than those who just ‘push people to perform’ without regular recognition. Social recognition and praise have a big role to play in employee engagement.”

Behaviour change isn’t going to happen overnight but with the right ingredients in place – like public recognition along with incentives and rewards – it will happen. 

Just to really make sure though, just how exciting are the performance incentives and staff rewards that you’re currently offering – or thinking about offering?

Think outside the box on this one and your staff will really feel valued and motivated. For example, you could introduce long service awards and employee rewards schemes as a good place to start.


It seems that pay rises can only do so much. Yes, they can change people’s quality of life, but from a business point of view, they can’t always offer the returns you’re really looking for.

If you can strike the right note and help employees to find meaning at work, you’ll go even further.

After all, according to psychologists, meaning, belonging and purpose can help us to feel engaged and be happy as individuals – and our work lives have a huge part to play in this.

Keep your staff happy but remember, there’s more to life than cash, as much as we might need it.

After all, money can’t buy happiness, right?

New call-to-action