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Five ways compensation increases employee satisfaction and productivity

The days of fresh fruit and bean bags are gone – compensation is now a full-blown package. Transformed from a basic salary, benefits today include paid annual leave, pension contributions, flexible working policies, access to health and wellbeing programmes and more. It’s about time the world faced an employee benefit revolution. 

Let’s not forget the wave of companies now offering employee equity – an additional financial reward on top of basic pay. Early-stage companies in competition with established businesses often struggle to attract, motivate and retain talent, and employee equity helps tackle the problem. 

The ways good perks can transform a business are widely known: fair compensation creates a more satisfied, productive and engaged workforce. Here are five ways they uplift and motivate employees to give their best at work:

1. Benefits build and foster a sense of community

Showing your employees you’re invested in them, stokes the fire of company culture and develops a feeling of togetherness. The next step is to create a plan of action. This can take the form of training opportunities to help employees improve their skills and further their careers, as well as fair compensation packages. These often include: 

  • Flexible and remote working arrangements
  • Forward-thinking parental leave policies
  • Health insurance
  • Pension contributions
  • Access to mental-health resources
  • Employee share schemes

Combined, these workplace benefits demonstrate that you value your staff as important members of the team and that you’re committed to their wellbeing. 

In a study carried out by The Alternative Board, 86% of business leaders reported that company culture has a direct effect on productivity. Employees who are happy, invested in their work and believe they’re valued members of the team are more productive and more likely to deliver results.

Learn what the experts had to say about building company culture in a scaling business at a Capdesk webinar.

2. Compensation raises the bar for employee motivation 

It works the other way too. As well as incentives trickling down from top management, compensation packages spur employees to look upwards and think about the bigger picture: the company’s success. Employee equity is a great tool for motivating and aligning individual interests with those of the business. 

Communicating the link between company performance and share price helps employees realise how their actions drive performance and impact overall business health. There’s a tangible financial reward for working hard and helping the company reach its growth objectives.

In the case of early-stage startups, many of which cannot match the wages of more established companies, offering employee options is one way of compensating for that disparity. The hours can be long, the work hard and the risks greater than if they had chosen to join a larger company. Giving your employees a slice of the pie shows you value them and recognise their contribution to the bigger picture. 

3. Lower turnover equals higher productivity

When someone leaves a business, finding a replacement is expensive, time-consuming and resource-heavy. It distracts from the work of other team members and the team as a whole.

It takes time to find a new employee. To fill the average customer service role takes on average 33 days according to research from Glassdoor. You also need to account for time spent on training and onboarding. Until the new hire is performing at max capacity, there's a burden on others to pick up the slack. 

Compensation packages that offer share options help to minimise employee churn and reduce the gaps in productivity associated with welcoming new employees. Many startups offer their staff share options over a four-year vesting schedule with a one-year cliff. This means that options only begin to vest after the employee’s first year is complete, and finish vesting after four years.

A four-year vesting schedule allows startups to reward employees for sticking with the company in the mid-to-long term. Some businesses emphasise this aspect of equity even further by utilising a back-weighted vesting schedule. This means a higher proportion of the employee’s options vest towards the end of the four-year schedule.

4. Employees feel fairly compensated for a hard day's work 

Workers wanting fair pay is an age-old tale. When employees feel that workplace circumstances are unjust, it generates an atmosphere of resentment and creates factions within the company. 

Over the years, Transport for London (TfL) found that proactively providing fair compensation led to employees feeling more valued, being able to trust the organisation and showing greater engagement. It’s also helped the company spend less time and resources boosting morale later down the line. 

In the case of startups with limited cash flow and resources, rather than employees creating a union and striking for action, companies can pre-empt these concerns in the form of an equity grant. In simple terms, bonus compensation on top of traditional salaries and benefits for the work that they’re contributing to the business now is paid out at a later date. 

5. Engagement increases with employee equity awards

Employee engagement is not the same as employee happiness or satisfaction, although engaged employees do report feeling happier and more satisfied in their jobs than disengaged employees. Engagement refers to a workforce that cares about the business and its goals, who are motivated to work hard to achieve results. 

A study by the Harvard Business Review shows that employees are as much as 22% more productive than unengaged employees. It also highlights how organisations with highly engaged employees are twice as likely to succeed over businesses with lower engagement. Your workforce can make or break your journey as a startup.

Well-designed compensation packages including employee equity help generate a deeper connection with a company. Employees are not solely concerned with their financial reward in the present. Enrolling employees on an option scheme also fosters a sense of community, encourages loyalty and makes individuals feel both valued and fairly compensated. 

 

Find out more about making the most of compensation packages to motivate employees, by taking a look at Capdesk resources. There, you’ll find a host of blogs, webinars and guides that help break down and explain many of the key concepts you’ll encounter when dealing with equity, compensation and employee satisfaction.

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