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The Integral Role of Salary in Employee Decisions and Strategies

Navigating the Tides of Change

In the landscape of employment, salary is not merely a number. Today it is seen as a pivotal element that influences an employee’s decisions.

Those decisions include:

  1. to remain with their current employer;
  2. to seek new opportunities; or
  3. to accept a new position.

The significance of Salary

Salary extends beyond the transactional nature of work done. It is better understood and far more felt in a personal sense. Salary goes to deeply impacting an employee’s:

  1. financial wellbeing;
  2. their capacity to thrive in the workplace; and
  3. outside of the workplace.

Financial Wellbeing and Job Satisfaction

A fair salary is intrinsically linked to an employee’s sense of financial security and satisfaction. It is considered as a tangible measure of their worth and the value they bring to an organisation. When employees perceive their remuneration as equitable, it fosters a sense of job satisfaction and loyalty, which is crucial for their long-term retention.

The notion of financial wellbeing and job satisfaction have been present for quite some time in our workplaces. However, their prominence and the way they are understood have become better evolved over the years. Further, these two elements can bring a direct impact on an organisation’s productivity and organisational behaviour.

Financial Wellbeing

Particularly after the financial crisis of 2008, interest in financial wellbeing become an important consideration as part of People & Performance strategy. Today financial distress is increasingly important as it has significant implications for employee well-being and performance. Being a not for profit/for purpose organisation is likely to have carried more sway a few years back, but today this has changed.

Job Satisfaction

Job satisfaction has been both recognised and researched for nearly 100 years. The simple reason for this goes to one of its key findings that satisfied employees generally outperform their dissatisfied counterparts. This relationship of job satisfaction and optimal well-being is set out in the research. Further, it is also recognised that job satisfaction can significantly influence an individual’s overall well-being.

Employee Engagement and Market Pressures

Understanding and maximising one’s salary can lead to heightened employee engagement. However, for NFPs a better understanding of the external factors of inflation and the rising cost of living facing employees is now something to be considered in its remuneration strategy context.

These external factors are seen to possibly exert pressure on an organisation’s remuneration structures, realistically necessitating a review at the very least, but more likely adjustments to ensure that salaries remain competitive and aligned with market standards.

Role of Salary in Employee Engagement and Organisational Strategy

Understanding the dynamic interplay between employee satisfaction and organisational success is a great start to understanding and maximising your organisation’s salary strategy as a key driver of engagement. A well-structured remuneration strategy not only serves as a catalyst for heightened employee engagement but also reflects an organisation’s appreciation and support for its employee’s aspirations and financial needs.

Essence of Salary in Employee Engagement

Employees who comprehend the full potential of their earnings are more likely to be engaged, motivated, and committed to their roles. This understanding fosters a sense of empowerment and recognition, as individuals see a direct correlation between their efforts and rewards. Hence, organisational leaders are missing an opportunity if they have not already initiated their salary planning and positioning to accommodate prioritising salary transparency and growth opportunities.

Those NFPs that have embraced both their understanding and adoption of this potential in the professional management of remuneration are poised to reap the benefits of a more dedicated and productive workforce.

Impact of Inflation and Cost of Living on Remuneration Strategies

Many NFPs appear to still be playing catch-up in this remuneration space. For today, one aspect seems very clear, the landscape of employee remuneration is volatile. And that volatility has it seems, become a permanent feature of the NFPs workforce landscape.

The unevenness of salary increases within and across functions demands greater attention and more nuanced management. Now, it is continually shaped by external economic forces, notably inflation and the cost of living. As these factors evolve, they exert tangible pressure on existing remuneration structures, compelling organisations to reassess and adapt their strategies. A failure to address these external pressures can lead to a misalignment between employee expectations and organisational offerings, potentially undermining employee engagement and ultimately their retention. Both are detrimental to achieving a desired level of organisational health.

Performance Link and Recruitment

NFPs are now more open to adopting a performance-based pay structure, seeing this as a means to motivate their employees to excel in their roles. While the NFP landscape has been slow to embrace this aspect it is becoming a more common consideration. There are many reasons for why there has been a change. One in particular goes to a need to attract talent and, in order to do so, to pay at the higher end of a range. The issue inevitably gets round to how can this be justified when needing to hold discussions with existing employees.

This shows how salary complexity has quickly emerged and will continue to play such a vital role in recruitment and retention strategies. Being very clear and confident in your organisation’s competitive remuneration packages are key attractors for new talent and can serve as a benchmark for improvements within current roles.

Ensuring Fair Remuneration

Nothing is better in this space than having the organisation commit to pursue a strategic approach to its remuneration program. To achieve this, it requires an NFP to adopt a multifaceted strategy.

This includes far greater transparency during the recruitment process about remuneration expectations and offering competitive pay, based on job market analysis. Hence, maintaining the currency of both internal relativities and external market benchmarking especially for those volatile roles helps maintain competitive and fair pay scales.

Some NFPs are still linking present remuneration planning to their past salary history. Unfortunately, in too many cases this may be the cause of creating and then continuing income inequality. Getting to better understand and apply remuneration principles and practices, will allow the NFP’s remuneration to more accurately reflect an employee’s expertise, potential, and the market value of their role.

Finally, the adoption of a holistic remuneration program, in other words having a well-defined NFP remuneration strategy, will eliminate the frequent arbitrary decisions observed in this area. It is also a powerful message to employees and ensures that they will feel valued for their contributions.

Non-monetary Benefits

Many NFPs need to rely on the use of non-monetary benefits. These of course can also play a crucial role in enhancing employee satisfaction, often complementing the financial aspects of remuneration. How these benefits impact employee satisfaction will be the subject of a future article.


In summary, salary continues to remain a cornerstone of employee engagement, necessitating a nuanced understanding by organisations of both internal and external factors influencing remuneration. By adopting a proactive and responsive approach to remuneration, NFPs can ensure that their remuneration strategies not only meet the financial needs of their employees but also support the overarching goals of employee satisfaction and organisational success.
It is, after all, so much a part of the Organisational Health. This focus monitors an organisation’s responsiveness in response to such challenges as remuneration programs. For organisations must exhibit agility and foresight in their remuneration strategies. Regular reviews of remuneration packages are essential to ensure they remain competitive and reflective of market standards. Adjustments, when necessary, should be timely and communicated effectively to maintain trust and transparency with employees.

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Enterprise Care has been providing specialist NFP benchmarking services across Australia for over 25 years.

What Sets Us Apart?

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DISCLAIMER: This article is general only in nature and is not advice.