Money talks? The motivational mechanisms of base pay on well‐being and work performance

Abstract

Whether compensation serves as a motivational resource for employees is still a debated subject. It has been suggested that the effect of pay on motivation could be contingent on the satisfaction of the basic psychological needs as outlined by self‐determination theory. The current research explored the role of amount of base pay as well as pay fairness discrepancy in relation to basic psychological need satisfaction, autonomous work motivation and, in turn, psychological well‐being (i.e., vigor and emotional exhaustion), turnover intentions, and work performance. Managerial need support was also included in the model, so its mechanisms and its effects on the outcomes could be measured against those of pay. Using a combination of archival data and employees' self‐reports from 593 Norwegian workers, results revealed that amount of base pay did not predict satisfaction of any of the basic needs, pay fairness discrepancy negatively predicted satisfaction of the needs for autonomy and relatedness and positively predicted satisfaction of the need for competence, whereas managerial need support significantly predicted satisfaction of all three needs. While there was no significant direct relation from amount of base pay to any of the outcomes, results showed a significant direct relation from managerial need support to psychological well‐being (positive to vigor and negative to emotional exhaustion) and turnover intentions (negative). There was also a significant direct positive relation from pay fairness discrepancy to turnover intentions.