‘Something Bigger’ than Pay: What Really Spurs Employee Retention?

Organizations are currently investing more in their employees’ total rewards (TR) than in previous years (all in, an average of $77,000 per person per year), yet those employers face a remarkable paradox: Retention remains fragile, engagement is declining and an increasing percentage of workers are actively searching for their next professional opportunities.

A new WorldatWork study, conducted in partnership with the Human Resources Certification Institute (HRCI) and the International Thought Leader Network (ITLN), surveyed more than 1,300 full-time workers and HR/people operations leaders in the first quarter of 2026 to understand if organizations are investing in the right rewards at the right time.

The findings from the 2026 State of Rewards Research Report indicated that while foundational rewards are satisfactory, they are insufficient to win workers’ hearts and minds and foster long-term commitment to their employer.

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The ‘Table Stakes’ Trap: Strong Satisfaction, Weak Commitment

Surveyed workers reported relatively high satisfaction with traditional, “table stakes” rewards:

77% are satisfied with their overall benefits.
73% are satisfied with offerings related to employee well-being.
69% are satisfied with their compensation.

However, the data showed this satisfaction doesn’t translate into retention. Only 44% of employees report being extremely likely to stay with their organization in the next year, and 75% are currently searching for external opportunities. More than 92% have actively updated their resumes.

The key takeaway is that while compensation is meeting base expectations, it’s not building loyalty.

“Pay matters. It always has, and it always will,” said WorldatWork CEO Scott Cawood. “A well-designed compensation strategy is foundational to attracting and retaining talent. Yet, pay alone won’t inspire people to do their best work. What drives performance, engagement and loyalty is something bigger.”

The New Drivers of Retention

As employees’ baseline financial and benefits needs are met, the research showed their priorities evolve toward nonmonetary and flexible aspects of work. When asked what truly matters for retention, workforce respondents said:

Pay (70%) and work/workplace flexibility (60%) are the primary factors.
Meaningful work (36%) emerges as the critical differentiator once pay and flexibility foundations are established.

Workers stated they are looking for organizations where:

They feel “seen”;
They have a true purpose;
Their work makes a difference; and,
They have room to grow with the organization.

According to the report, the rewards components with the highest [workforce] satisfaction scores — compensation and benefits — are the weakest predictors of retention, whereas the rewards with the lowest satisfaction — career development and recognition — are the strongest.

“What that … tells us is people are not primarily motivated by a transaction,” said Harvard University and ITLN researcher Shawn Achor. “Compensation gets people in the door. Belief in their work is what makes them stay.”

Miscalibrated Leadership: Minding the Gaps

An additional research surprise came when examining managers’ perceptions of what matters most to their employees. Almost 70% of participating managers said they were either “extremely confident” or “very confident” in their understanding of what their people value. However, the data showed those perceptions are often off-base.

While managers correctly identified pay as the top driver, they:

Overemphasized career advancement as a retention tool by 15 percentage points more than employees do.
Underestimated how much employees value other TR elements, such as flexibility, benefits and time off.

The perception discrepancy means organizations and their managers are spending time, energy and money on rewards that employees, in general, do not value as highly as others.

The Path Forward: High-Satisfaction Rewards

To bridge this gap, the report recommended that organizations move beyond “peanut butter pay” — spreading increases evenly regardless of performance — and target rewards to what their employees value most, such as personalized flexibility, development, and a clear connection between their work and corporate goals.

Specific callouts for HR/TR leaders include:

Moving beyond transactions. The study indicated a shift from transactional, one-size-fits-all benefits to personalized and holistic support across various stages of the employee lifecycle.
Prioritizing alignment. The most effective strategies focus on aligning rewards with organizational goals, enhancing employee well-being and strengthening connection.
Equipping managers to succeed. Because manager-employee perceptions diverge, organizations should equip managers to have better career and rewards conversations, ensuring rewards aren’t just given, but also understood and appreciated.

“Without the right HR strategy and a strong employee experience to support it, even the most competitive pay diminishes in value,” Cawood said. “At the center of that experience is your unique opportunity. ... The organizations that get this right aren’t just attracting talent, they are unlocking it.”

Get More, Learn More, Do More

Workspan Daily readers can click here to gain access to the full State of Rewards report, which includes:

Expanded data, charts and graphs;
Detailed insights on the findings;
Direct quotes from survey respondents;
A practical framework to help you map employees’ relationship with their work to the organizational levers that influence it; and,
Evidence-based strategic recommendations for HR/TR leaders.

WorldatWork members will receive exclusive bonus content in Workspan Magazine’s June-July issue. That publication will include in-depth articles (plus a helpful infographic) that explore:

Why you need to rethink what motivates the workforce;
How employer interpretations have veered so far from reality;
Why you need to hinge your rewards on the employee lifecycle;
The critical roles of “meaning” and “purpose”; and,
Why the road to progress runs through your managers.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: