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4 Ways to Understand Employee Psychology Towards Compensation

By
Eloise
Hicks

HRM and Payroll Software

4 Ways to Understand Employee Psychology Towards Compensation

December 23, 2021
min read
By
Eloise
Hicks
|
December 23, 2021
8 min read
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Finances have become increasingly important for Kenyans due to the economic crisis caused by the COVID-19 pandemic. A survey by the charity Twaweza revealed seven out of ten households worry about their finances more than their health in the light of the pandemic. In light of this, it's clear that employers must do their part in assisting employees financially. However, this isn't as simple as one might think.

As an employer, you need to understand that your employees’ perception of finances and compensation is shaped by events like the COVID-19 pandemic. To illustrate, Morgan Housel's book on the psychology of money emphasises that one’s personal history, perception, and experiences can influence their financial needs. As such, there’s more than meets the eye when it comes to employee compensation, and it goes beyond simple computations. In line with that sentiment, here’s how you can understand your employees’ perception towards compensation:

Conduct salary research

To improve your employee retention, make it a point to conduct regular HR audits. Our article on ‘Why Organizations Should Be Conducting Regular HR Audits’ highlights that wages, benefits, and company policies are issues that must be regularly examined by the department. One common issue that comes up during regular HR audits is the employees’ compensation. Therefore, companies need to conduct proper salary research to comply with regulations on pay scales and keep their employees motivated at the same time. Moreover, this research will give you valuable insight into how high-performing companies in your industry are going about employee compensation. This, in turn, can give you ideas on how to improve your own internal compensation processes.

Understand the workforce’s needs

HR audits also reveal the concerns of your employees, which can help you understand their needs. Besides providing a fair salary, The Balance Careers emphasizes that employees also need to be compensated through good workplace practices. For instance, comprehensive reward and recognition systems are crucial in enhancing your employees’ workplace experience and quality of life. Small tokens of appreciation provided throughout the year can help your employees feel valued for their hard work. Your workforce also needs a proper mentoring program where they can improve their skills and knowledge to move up the career ladder. While these may not be monetary payments, these incentives will make your employees feel valued and recognised.

Don’t neglect employee benefits

Though benefits may seem like financial burdens on the company, these are essential incentives that can dramatically boost the productivity and morale of the employee. First and foremost, Kenyans.co.ke stated that paid leaves are a workers' rights, which is why they're protected by labour laws. This enhances the relationship between workers and employers, plus it prevents industrial unrest. On top of that, many employees had to deal with worsening financial health during the COVID-19 pandemic, which is why financial planning resources became one of the benefits that improved productivity. These benefits are essential because they address your employees’ concerns and positively affect the quality of their work.

Have a conversation with your employees

Lastly, you can provide the incentives that your employees want by conducting regular check-ins with them. These conversations will help you understand the different needs and experiences of your employees within the company. And the comments and suggestions you get will help you get to the root of the concerns that may be affecting their work productivity. These discussions will also help you understand the expectations that each employee looks for from the company. Overall, these conversations will give you a solid grasp of the current issues among the workforce and find the best incentives that can address these problems.


Your employees' attitudes towards compensation and benefits are rooted in real-life problems. To understand their psychology towards compensation, conduct salary research, understand their needs, provide the necessary benefits, and have a proper discussion with them. These will help you improve their morale and productivity in the workplace.

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