5 ways to motivate employees without financial incentives

The perfect storm is about to hit the shores of the U.S. market. Pay raises are on the decline and are expected to be lower in 2025 than 2024, according to reports from consulting firms Willis Towers Watson (WTW) and Empsight.

While the American Psychological Association’s Work in America survey found that 33% of workers plan to look for a new job next year.

WTW surveyed around 31,000 organizations and found that the overall median pay raise for 2024 fell to 4.1%, compared with 4.5% in 2023. Employers—at least so far—are pegging overall salary budget increases even lower.

WTW found that organizations are predicting a salary increase budget of 3.9% in 2025. Empsight is similarly projecting that total salary increase budgets will be 4% for 2025, while median merit budgets are projected to be 3.5% for 2025.

These percentages are a hard pill to swallow for employees who’ve grown accustomed to receiving healthy annual pay increases, along with on-the-spot bonuses. No doubt this projected decline in pay raises will have an impact on employee morale and could result in more employee turnover than anticipated.

With that in mind, here are five ways to motivate and retain employees when financial incentives fall short.

1. One-time salary increases

Much of the concern around giving out high percentage raises or other financial incentives is the impact these raises will have on the future cost of a company’s payroll. Companies can hold their future payroll expenses in check by giving out one time pay raises at review time.

These one-time increases are not added to someone’s salary when compensation increases are awarded in years to follow. Of course, you do run the risk that an employee will leave shortly after receiving their payout. However, you can minimize this risk by considering ideas two through five.

2. Provide learning opportunities 

Learning and development is highly valued by employees as it gives workers the skills they need to promote within an organization or make lateral moves. Promotions are a way for employees to increase their earning power, even when companies are holding the line on merit increases.

It’s also important to note that companies with a strong learning culture observed employee retention rates two times higher than other organizations, according to LinkedIn’s 2024 Workplace Learning Report.

Employees, who receive learning and development opportunities from their employers, are much more adaptable and can more easily move into positions that may be vacated by those choosing to leave due to lower than expected pay increases or other financial incentives.

3. Help employees feel seen and heard

Employees need to feel like they matter and if they left tomorrow, someone would notice. Leaders today must be far more deliberate about creating a culture of belonging. With the rise of hybrid and remote work, connecting with team members may feel more challenging.

It doesn’t have to be this way. Companies may want to encourage their managers to participate in an initiative that I’ve coined called, “Time Out for a Coffee.” This is where managers are encouraged to set aside an hour each week (or month) for their employees to informally come together for coffee (or tea).

These gatherings can be done in person or remotely. Just be sure to send gift cards out ahead of time to those workers who are not in office so they can fully participate. This is the perfect time for leaders to get to know their people on a more informal basis and listen deeply to what their employees have to say.

4. Humanize the workplace

Too many workplace cultures seem to require that people “cover.” It’s considered a faux pas to talk about a childcare snafu or the need to dash out to care for an ailing parent. So instead, workers lie. They suddenly feel ill at work and dash out the door. Or worse, they don’t come into work knowing that there’s a good chance they’ll receive that dreaded call saying they need to handle a family matter.

Leaders can make the workplace more human by openly discussing personal challenges they’re experiencing in front of employees and being amenable when workers occasionally ask to work from home. Modeling that it’s safe to talk about home at work will go a long way toward helping ease workplace stress that could lead to employee turnover.

5. Prioritize work-life balance

When money is tight, employees are usually asked to do more with less. However, given that you may not be able to reward people adequately for their efforts, you may need to consider ways to make workloads more manageable.

Begin by asking your people to examine their day-to-day tasks and to come back to you with suggestions on what tasks can be eliminated, as we know there is a lot of “that’s the way we’ve always done things” tasks going on that no longer make sense.

Resist the temptation to email employees over the weekend or at night so they can fully enjoy their time off. Do your best to accommodate vacation requests, even if it’s for unpaid time off.