Employee Motivation and Total Compensation Package


The goal of any commercial organization is to extract the maximum amount of profit from available resources, including human resources. However, the question of the balance between the highest efficiency and staff motivation leads to the need to adjust the company’s goals. Setting impossible goals will not make the enterprise more efficient, so the Human Resource department must skillfully combine the strategies implemented in the organization to motivate employees.

The first purpose of this document is to explore the relationship between these two concepts from the point of view of HR workers. The research task is to find out exactly how to set goals without harming either motivation or effectiveness. In addition, this paper examines the issue of the total compensation package and the impact of the package as a whole and its components on the degree of employee motivation.

Alignment of Strategies to Employees’ Motivation

In the case of a commercial enterprise, the most crucial goal is to maximize profit. However, it can be achieved in various ways, for which there is a wide assortment of management strategies. In this context, one of the most important factors to consider when planning is the motivation of the company’s employees. Although many enterprises see employees only as a resource, such an attitude often decreases employee motivation and overall efficiency. Consequently, the goals set should consider the desires of the personnel themselves, which will motivate them to work effectively.

One of the possible ways to align the company’s strategy and motivate employees is SMART goals. This acronym stands for Specific, Measurable, Achievable, Relevant, Time-Bound, which corresponds to the main components of this model (Strickland, 2019). To create an effective strategic plan, the objectives included in it must meet the specified criteria. For example, specific goals should be formulated in a way that is understandable to any employee. These criteria should apply to all goals since full compliance ensures a comfortable working environment, which is one of the essential criteria for motivating workers.

In addition, clear goal-setting should be complemented by a clearly understandable reward system. All employees must know what exactly they will get from the successful completion of this task. In this context, wages are often not a good motivation tool. That is why there is the concept of a compensation package, which includes many additional financial bonuses that can motivate a person (Lake, 2021). In addition, motivation can be produced with the help of non-monetary incentives, such as the provision of more flexible conditions or opportunities for self-education (MTI Events, 2020). Studies show that both methods have a right to exist and can be effective in different circumstances. However, all these costs must be accounted for and applied in moderation, without risking undermining the organization’s budget in both the short and long term.

Compensation Program Influence on Motivation

As mentioned above, additional material payments as part of the compensation package impact the motivation of employees. Labor efficiency depends not only on the volume of the annual salary but also on other components, each of which has a different contribution to the overall motivation. So, for example, an increase in payments for the production of specific units of goods can lead to an increase in the number of products provided since the employee will be motivated to receive more money. However, in such a situation, the quality of the final product may suffer, as the worker will focus on quantity (Bhasin, 2017). On the other hand, if an employee receives wages for the number of hours worked, then a change in this factor will not impact motivation. In other words, an office worker will not care how many papers he completes today if the final salary is the same.

Various kinds of material bonuses paid, for example, for holidays or at the end of a project, are other practical tools. Such payments are usually not used often; however, they can increase employee morale, being an unexpected pleasant addition. Accordingly, the influence of this component on morale is positive but short, and too frequent use of bonuses can lead to the fact that they become habitual. Finally, a significant influence on motivation is the various means to improve a person’s life – health, dental, life insurance, paid vacations and retirement plans (Lake, 2021). In other words, providing workers with more comfortable working conditions allows people to work more motivated and efficiently.

However, it should be noted that recently, non-monetary incentives have had a more significant impact on employee motivation. According to research, out of eleven proposed awards, Federal employees selected eight non-monetary rewards as more important than cash bonuses (Grundmann et al., 2012). Consequently, despite the successful effect of the total compensation package on the motivation of employees, the additional use of non-monetary incentives can increase motivation even more.


Thus, the issue of employee motivation can be solved using several tools. First of all, to correlate the goals of the company and the desires of employees, it is possible to use specially created systems, including the SMART goals system. Such a strategy makes work more comfortable by establishing transparency in the working environment and increasing its comfort. However, a similar result can also be achieved by introducing a total compensation package, which includes various cash bonuses of a short-term and long-term nature. Each has a different impact on motivation, but insurance benefits and opportunities to improve living conditions often have the most significant impact on employee motivation. Finally, according to research, an additional effective option is the use of various non-monetary rewards.

Combining all approaches and taking these factors into account can allow the Human Resource department to most effectively align the company’s goals and ways to motivate employees to achieve maximum efficiency.


Bhasin, H. (2017). What are monetary incentives? Advantages and disadvantages of monetary incentives. Marketing91. Web.

Grundmann, S.T., Wagner, A.M., Robbins, M.A., Tsugawa, J.J., Peter Leeds, J., Osowski, J., & Roth, S. (2012). Federal employee engagement: The motivating potential of job characteristics and rewards. U.S. Merit Systems Protection Board.

Lake, R. (2021). Annual compensation vs. annual salary: What’s the difference?. Investopedia. Web.

MTI Events (2020). Why non-monetary incentives are replacing monetary incentives. Web.

Strickland, K. (2019). SMART goals for managers and leaders. PeopleGoal. Web.

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BusinessEssay. "Employee Motivation and Total Compensation Package." December 15, 2022. https://business-essay.com/employee-motivation-and-total-compensation-package/.