Fostering Employee Happiness: Examining the Significance and Boundaries of Financial Rewards

The idea that money does not guarantee happiness has been around for a while. In his important book Working, Studs Terkel talked to regular people and found that work is not just about earning money; it is a search for purpose, recognition, and amazement as well.

With the world changing after COVID, many workers are thinking about their choices. Some are not going back to their old jobs. The question is, will getting paid more make a difference? Are workers looking for work that is meaningful, or do they just want more money?

A study in 2018 found that 9 out of 10 employees are willing to give up some of their lifetime earnings if it meant having more meaning in their work. Is this true for everyone? Read on and learn more about the importance of financial rewards and their limitations in achieving employee happiness and fulfilment.

The Significance of Money: Beyond Material Wealth

While money is not the only thing that matters, it does play a big part in our lives. Having enough money to pay for basics such as food and a place to live makes us happier than having a hard time affording those things. But having more money does not automatically mean you are happier.

A famous study from Princeton University in 2010 found that up to an income of about $60,000 to $75,000, having more money only made people a bit happier. But once you go beyond that range, the link between money and happiness becomes less strong. To put it simply, having a certain amount of money is important to solve basic life problems that can stress us out and make us unhappy.

Surprisingly, a study from Purdue University in 2018, using information from the Gallup World Poll, discovered that when people earned more than $105,000, their happiness levels tend to go down. Brad Klontz, a financial therapist and psychology professor at Creighton University, says, "In the end, we're human, and we still struggle with big questions like the meaning of life and who we are. Having a lot of money doesn't make those questions go away."

The Limits of Joy: Beyond the Pursuit of Happiness

Happiness may not only be tied to money, but it does not mean people do not care about it once they reach a certain income. Money itself may not make you happier, but it does influence how you see your success, security, and control over your life. A study from the Wharton School of Business at the University of Pennsylvania found that having money gives people the freedom to shape their lifestyles. Matthew Killingsworth, a senior fellow at Wharton, suggests that there is no specific income point where money stops being important.

In the COVID pandemic, your income may have had a bigger effect on your happiness. For example, having some extra money saved up makes it easier to handle times when you do not have a job. Aside from this, having a well-paying job can mean being able to work from home, giving you more control over your life.

Workers naturally want to earn more money as time goes on, and it is not just because they want more. It is because the cost of living keeps going up, and they need to keep up with that reality.

Employers looking to keep and attract talented employees in today's changing workplaces must understand that keeping workers satisfied and on board is about more than just making them happy. While happiness is important, it is equally crucial to meet the diverse needs of employees. The challenge is that different employees value different things; what motivates a Gen Z worker may not be the same for a Gen Xer or a Boomer.

Can Expenditure Lead to Increased Happiness?

Upon acquiring funds, does spending money impact overall happiness? The answer is affirmative, but the complexity lies in the expenditures.

A study in 2014 led by Thomas Gilovich found that spending money on experiences is the best way to increase happiness. Another idea, called "prosocial spending" by Elizabeth Dunn, shows that even using a small amount of money to help others can bring more happiness than spending it on yourself.

One good way to use money is to spend it on things that make your time better. This can mean getting help with tasks you do not like, buying tools that make chores easier (like a dishwasher), or even working less when you can afford it. You can then use the money you save to do things that make you happy, such as enjoying hobbies, spending time with family and friends, or treating yourself to movies or music. This has the potential to enhance your overall sense of happiness.

Buying things does not always make us as happy as other ways of spending money. But when you want to be happier with what you buy, you can try a few things. Instead of one big purchase, you can try several smaller ones. Think carefully before buying something, and really consider its lasting impact on your daily life. This can help you get more happiness from the things you buy.

Navigating Employer Dilemmas: What Is the Right Course of Action?

To navigate these differences and adapt to the changing nature of work, companies must reconsider and tailor their rewards programs. This involves understanding the unique needs of a diverse workforce and adjusting compensation strategies accordingly. Building a comprehensive rewards strategy, supported by a capable compensation management system, is essential for effectively meeting the varied needs of employees.

Assess your current compensation management approach and identify areas for improvement by using an independent tool for a comprehensive evaluation, ensuring that your rewards program aligns with the nuanced preferences of your workforce.