Speculating on the salary of your office neighbor is a double-edged pleasure that often ends in a cold shower. It is the cruel application of the equity theory popularized in the 1960s by the American psychologist John Stacy Adams. Namely the idea that our motivation at work depends on our perception of equity, that is, the personal ratio between our contribution to the organization and the compensation we receive from it. A ratio that we then compare to that of our colleagues, or at least to the idea we have of it. This then results in a feeling of justice or injustice. “When I look at myself, I feel sorry, and when I compare myself, I feel a little more sorry”… Because the compensation policies implemented within companies create more or less frustration, inequity and sometimes, let’s say it, resentment among the most deserving.
Take for example the famous NAO, the mandatory annual negotiations between the employer and union representatives. These do not imply any obligation to conclude but, in practice, companies generally provide an envelope for collective increases and another for individual boosts. The fervent defenders of the “all collective” – the unions – will welcome a system that has the merit of increasing people who otherwise would never get it, especially in times of inflation. Its detractors will regret seeing merit sacrificed on the altar of egalitarianism. “It is very frustrating to sprinkle a general increase. It sometimes rewards employees who have not done much and the most deserving ones that you want to value more, you cannot do it”, deplores Caroline Diard, associate professor at TBS Education, the Toulouse management school. Which is based on an example: “If you make a 20 euro increase for everyone, in terms of payroll, this represents an effort for the employer but from the employee’s point of view, it is counterproductive.”
Conversely, explains this former HR director, if you have an envelope that represents 2% of the payroll and you distribute it among a certain number of people who have been particularly efficient and deserving, you are more effective in your human resources management dynamics. Especially since in their study “Does growth make you happy?” published in 2008, economists Andrew Clark and Claudia Senik highlight an important fact: “the satisfaction that people get from their income is essentially relative, the increase in my income only satisfies me if it is higher than that of the people to whom I compare myself, my ‘reference group'”. Thus, if my salary and that of my colleagues increase simultaneously in the same proportions, this will have no net effect on my job satisfaction.
Everyone evaluates their psychological contract at all times.
Another salary policy that is unlikely to cause a wave in the open space: promotion with little or no increase, as is increasingly the case in the United States. Enough to “generate a lot of frustration”, according to Caroline Diard. Because alongside the employment contract, when a person accepts new responsibilities, a psychological contract is formed, “formed by the real but unwritten expectations that an individual member of an organization forms towards it” (Véronique Steyer and Anna Glaser, Dynamique des organizations, 2024, Dunod, 245 P.). Unconsciously, individuals evaluate at every moment where their psychological contract is. However, “if it is broken, individual responses are varied, but the consequences can be significant: demotivation, drop in individual contributions, departure from the organization, etc. (ibid.)”.
An article from the Wall Street Journal published in March, however, invites us to look beyond the purely financial aspect: accepting a so-called “dry” promotion can be “judicious when the position held will allow you to accelerate your career”. This seems to be supported by a survey of more than a million Americans between 2019 and 2022 and according to which 29% of people leave their job within a month of their first promotion. A precious extra line on your CV can therefore serve as a springboard. On the other hand, on the employer’s side, we will avoid using it as an argument to justify refusing to put our hands in our pockets: “this speech is understandable in times of crisis but not in a context where you can find a job in 15 days”, says Caroline Diard, who invites us to rethink remuneration policies and to imagine systems “more based on performance or objective criteria other than age or seniority”. In other words, betting on the variable compensation, which today concerns one in two companies, but only one in four employees (Ifop, 2023).
A satiety threshold
But to be a real lever of motivation, remuneration must not only be looked at at a given moment. “Employees are not motivated by a salary in itself, but rather by its progression over time”, estimates Patrice Viot Coster in an article published by Tissot, a portal specializing in labor law. This management teacher at Paris-Dauphine explains that “the demotivating potential of salary is greater than its motivating potential and even if one is satisfied with its increase, the motivational ‘boost’ fades quickly”. “Individuals get used to the standard of living permitted by their income, so much so that the satisfaction they get from it fades after a while. Changes in their income can therefore only have a temporary effect”, support economists Andrew Clark and Claudia Senik.
When it comes to motivation, the most important thing is not always the amount. According to work by a team of American researchers from the University of Iowa published in 1997, a salary increase must be around 7 to 8% for workers to be happy about it and motivated to work more”. Something that is rather rare in reality (in 2023, the median real increase in salaries in France reached 4%). Many studies and specialists also agree that it is not so much the increase itself that constitutes a lever of motivation, but the way in which it is presented to the employee. In an article published in the Human Resources Management Review In 2017, researchers believe that “the way in which compensation is administered and managed” is “determinant in making it a tool of recognition and support from the organization.” Emphasizing that “very often salary increases will take place at the end of annual interviews,” the authors recommend “that the manager have a new exchange with the employee when the increase is obtained or not” in order to “continue to provide support (e.g.: explanation, positioning in relation to others) to the employee.”
From a certain threshold of satiety (a study published in 2018 in Nature places it at $105,000 per year for an American), other elements than remuneration will also fuel the motivation of individuals, adds Patrice Laroche, a teacher-researcher at the University of Lorraine. Elements that will come under intrinsic motivation, i.e. any action guided by our own desires and not by external factors such as a reward or a sanction for example. As described by professor of psychology and behavioral economics Dan Ariely, “certain intangible emotional forces are an important source of motivation such as the need for recognition or ownership, the feeling of accomplishment, feeling secure in a long-term commitment as well as having common goals” (The springs of motivation. Meaning, commitment, efficiency). This applies in particular to executives: “the more employees are trained, the more they will need autonomy and feedback”, points out Patrice Laroche, specifying in passing that remuneration, while it remains a strong incentive, is more a factor of dissatisfaction than satisfaction”.
A remuneration strategy adapted to the profile of employees
Finally, when it comes to remuneration or compensation, each measure implemented by HR must raise questions: is it aimed at the right people, will it be a lever for motivation and therefore performance. Caroline Diard gives a simple example: “if you have employees over 45, who are already settled in life, and you talk to them about pensions and retirement, then these will be effective remuneration tools. Conversely, if a company’s employees are on average 25 years old and you set up a PER, you will get motivation close to zero”.
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