Link Between Worker Pay And Satisfaction Not Simple, Study Says

COLUMBUS, Ohio -- It seems simple enough: pay workers more and they’ll be more satisfied with their salaries.

But new research suggests that satisfaction doesn’t always rise at a constant rate along with pay.

A study of 456 nurses at one Midwestern hospital found that satisfaction actually accelerated as the nurses’ pay levels increased. In other words, each additional dollar spent on pay was worth more than the previous dollar in terms of satisfaction.

“The assumption has been that satisfaction goes up steadily right along with pay, but we found that isn’t always true,” said Rob Heneman, co-author of the study and professor of management and human resources at Ohio State University’s Fisher College of Business.

“One conclusion is that deciding how much to pay employees isn’t as easy as many managers believe.”

Heneman conducted the study with David Greenberger, and Stephen Strasser, both associate professors at Ohio State, and Gayle Porter of Rutgers. The results were published in a recent issue of the Journal of Business and Psychology.

In this study, Heneman and his colleagues asked nurses at a Midwestern hospital to complete a questionnaire that measured how satisfied they were with their pay. The researchers than examined how responses to the questionnaire were linked with factors such as pay level, age, years working at the hospital, and job level.

There are several reasons why satisfaction may have accelerated as pay increased among the nurses, Heneman said.

For one, many of the nurses had been at the hospital for a long time and were aware of the long-term budget constraints of the hospital. So, to the extent that higher salaries were awarded, the employees would have been surprised and happy because the salary exceeded expectations.

In addition, like many hospitals, the one studied did not have a well-developed performance appraisal system, Heneman said. Little performance feedback or recognition was provided.

“When employees aren’t given a lot of feedback about how they are doing, they have to use pay as their only measure of worth,” he said. “This magnifies the importance of salary as a way to feel appreciated and for employees to gauge their importance.”

If there was a better performance appraisal system at the hospital, pay satisfaction may have risen more steadily along with salaries, he said.

Heneman said the results show that employers can’t assume they know how the pay raises they give workers will affect satisfaction. Satisfaction may rise at an increasing rate along with pay -- as it did in this study -- or at a steady rate, or even a decreasing rate. Employers need to consider characteristics of the job, the employees, and of the pay system administration to fully understand the link between pay and satisfaction.

Companies should do an analysis of their employees and pay system to find what works best for that organization, according to Heneman. The results may show the need for flexibility in spending priorities. For example, some companies may find they need to spend more on salaries for the lowest-paid workers -- because they would get the most satisfaction -- while the higher-paid workers would not need as much of an increase.

“By knowing how pay is related to satisfaction in their companies, managers can learn how much they need to spend to keep their workers happy,” Heneman said.

“The problem is that very few employers evaluate the effectiveness of their pay systems. Given the huge investment companies make in salaries, it’s amazing to me that more of them don’t evaluate their pay systems.”