5 Ways to Boost Employee Compensation Without Raises

By Joe Taylor | Posted November 08, 2012

After entrepreneur Ilya Pozin suggested a list of the "9 things that motivate employees more than money" on Time's small business website, dozens of commenters debated whether or not cash was still king. Some readers worried whether Generation Y's focus on life experiences had dethroned the regular paycheck, but most of the respondents cited a material boost to their bottom line as a major reason they stay engaged in their own careers.

However for a variety of reasons, it's not always possible for entrepreneurs to fight career boredom with raises:

  • An "out of cycle" raise could trigger concerns about employee favoritism
  • Bonuses and raises could trigger higher tax withholding requirements for both employers and employees
  • Adding extra cash to the payroll budget could sap marketing and customer retention resources

A recent Harvard study concluded that many employees will work harder to prevent losing a perk or a benefit than they will for the promise of a bonus or a deferred gain. Therefore, savvy entrepreneurs have figured out some clever ways to stretch their companies' compensation budget without causing any nasty side effects.

5 Alternatives to Employee Raises

1. Cover professional development expenses

Online colleges have made it easier than ever for employers to encourage long-term professional development. Covering the cost of a certification or of a degree-related course costs less than a raise, and it potentially builds a bench of loyal talent.

2. Blend work travel with family vacations

Professional conferences often land in tourist-friendly destinations such as Las Vegas or Orlando to help attendees minimize expenses. Allowing employees to bring along family members for a long weekend before or after approved travel can cut the expense of a typical vacation.

3. Extend purchasing perks and memberships

Very small businesses with warehouse club memberships can often register employees for a fraction of the cost of regular memberships. Many Silicon Valley startups have discovered that inexpensive perks like free laundry and discounted movie tickets can help keep employees excited during crunch times.

4. Boost benefits

For companies that already pay health benefits, nudging deductibles down or adding a few extra preventive perks usually requires just an incremental increase in employer spending. Covering the cost of flu shots and wellness exams reduces each employee's costs, while improving the team's overall physical and emotional well-being.

5. Champion charitable giving

Most non-profit organizations already process matching gift documentation on behalf of companies who can help employees maximize their cash donations. Entrepreneurs without a lot of cash on hand can let employees volunteer for approved charities "on the clock."

Each of these examples produces a tangible benefit for employees, while allowing employers to increase their tax-deductible expenses.

Joe Taylor Jr. has covered personal finance and business for more than two decades. His work has been featured on NPR, CNBC, Financial Times Television, Fox Business, and ABC News. He recently completed a personal finance book entitled The Rogue Guide to Credit Cards; (Rogue Guide Books, 2012).

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