Here’s a paradox I’ve always thought was interesting. In my 20 years of running employee research, pay satisfaction is nearly always among the most negative in terms of responses. However, when it comes to how much pay actually drives engagement, it basically never registers. In fact, I've only ever seen pay show up as a key driver once in my career. 

That insight I've observed over many years tells us a lot about the psychology behind rewards for employees. It’s a fascinating mix of the rational and irrational. 

This paradox was part of what we wanted to explore with our Center of Excellence research study that fielded earlier this year. We asked 4,800 employees in 21 countries and 11 industries how they felt about monetary awards, in order to understand what actually moves the needle in terms of motivation—is it the dollar amount, or does throwing money at the problem not work? 

Note: this is about monetary awards given as a spot bonus or thank you for good work, rather than base salary pay. 

The research: what reward value is right

The first thing we wanted to understand was the award value itself. So we asked people how much they had received as a thank-you for good work, and whether that felt appropriate or meaningful. 

The results were clear! First of all, we found there’s a minimum threshold for a thank-you reward to feel meaningful or appropriate: it’s $25. An overwhelming 80% of our respondents said that anything less than $25 wouldn’t feel significant, and 65% said it wouldn’t even feel appropriate. 

But more isn’t always better. Our research also found a clear point of diminishing returns when it comes to this type of reward: $250. 62% of our respondents felt that a reward from $25-100 was significant. That number jumped 24 points to 86% for a reward from $100-250. However, the jump to $250-500 was much smaller—only 4 points to 90%.

And importantly, this was the case regardless of the salary band they belonged to. 

Put together, this data suggests that if you’re looking to give out a spot reward, maybe for completing a challenging project, or as a mid-year “thank-you” to employees, the sweet spot is $100-250 per employee. 

The reason behind reward value

But—and this is what makes reward so complex—it's not JUST about the dollar amount. When asked why a monetary award felt significant, "contribution/achievement recognition" (55%) and "sense of pride" (45%) far outpaced "monetary value" (29%). 

That same importance of meaning came through when we investigated what made people feel more positive about their monetary award. For example, an award attached to length of service mattered more than the value of the award itself. Recognition from managers and senior leaders also boosted award satisfaction. 

I’ve seen this pattern throughout my career measuring employee sentiment. Money is most definitely a hygiene factor—you have to clear a minimum floor or it will frustrate people and diminish motivation and commitment. However, once that floor is cleared, pay alone won’t increase motivation further. Pride and recognition have to take it forward from that point. 

There is one exception from our research. Employees who only received recognition from peers actually reported slightly more negative reward perceptions—which makes sense. If your peers see your good work but it’s not reflected further up the organisation, you may start to feel undervalued. So it’s critical that recognition comes from above as well as from peers. 

Strike the right balance of meaning and value for employee rewards

The core takeaway: you definitely need a floor when it comes to reward, but you must add the meaning to get the full psychological benefit. Skip the meaning, and you’re leaving money on the table.

That meaning can come from a) recognising loyalty through service awards, b) being specific about the achievement that got the reward, and c) making sure good work is acknowledged up the organisation. Our research shows that those three practices will give you more leverage from the same compensation spend.