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How to Boost Employee Compensation Without Raises

The ability to motivate employees is one of the greatest skills an entrepreneur can possess. Ultimately, money makes the best carrot, and if you can afford to give high-performing employees regular raises, then by all means, you should share the wealth.

However, for fledgling small-business owners, it’s not always easy to be generous. And for a variety of reasons, a straightforward raise may not be the best way to reward an employee:

  • “Out of cycle” raises can cause jealousy and insubordination
  • Cash bonuses and raises can affect the tax status of your employees or your business
  • Diverting cash to the payroll budget can sap other resources, such as marketing and investments


A recent Harvard study found that many employees will actually work harder to protect a standing benefit, even something as simple as free coffee or complimentary laundry services, than for the promise of a deferred gain. Therefore, savvy business owners need to find clever ways to boost employee “compensation” without breaking the bank or undermining morale. Here are 3 ways to motivate your staff without directly raising wages.

1. Extend Purchasing Perks and Membership

If your small business has a warehouse club membership, then you might be eligible to register your employees for a fraction of the cost of a regular membership. In Silicon Valley, where startups with high-performing employees are traditionally cash-poor for a period of two to three years, companies have found that inexpensive perks such as cheap laundry, discounted movie tickets, and warehouse club memberships help keep employees excited and loyal during difficult financial times.

2. Pay for Professional Development

It is always in your best interest to support continued education and skills training for your staff. Online colleges have made it easier than ever for employers with limited financial resources to encourage their employees to pursue long-term professional development. Offering to foot the bill for a certification of a degree-related course may ultimately cost less than a raise, and it helps you build a more qualified and loyal workforce.

3. Be More Generous With Praise

Everyone wants it, and it’s one of the easiest things to give. Plus, praise from the boss goes a lot farther than you might think. Applaud every improvement that you see your team members make, and give high-performing employees public recognition. Organize contests or intra-office games, and hand out small rewards to the winners. When the company does well, celebrate! This is a fantastic way to let your team know that you appreciate their hard work.


Marshall Walker Lee graduated Summa Cum Laude from the University of Michigan's Honors College with degrees in Writing and Philosophy. As a freelance writer and designer he has developed branding strategies and programming for J. Walter Thompson, Nike, the Kellogg Foundation, Spike TV, Sony Films, and General Motors. He is the co-founder and director of Poor Claudia, a 501(c)3 non-profit publishing enterprise based in Portland, Oregon.