Many of our clients who use PI to better understand their employees’ behaviors and key drivers have found that a minor pay boost is sometimes only a short term fix. To enable long term growth, smart companies understand the importance of assessing their employees’ overall needs now, so they stick around later.
When deciphering which rewards will help retain employees, organizational psychologists suggest considering:
The “Equity” Angle: Employees will look at the fairness with which organizational rewards such as compensation are allocated, and this evaluation can have a substantial impact on their motivation and subsequent commitment to the organization. An “across-the-board” pay raise of 10% for example, may violate some employees’ conceptions of fairness.

The “Cross-Cultural” Angle: Global companies like Google have a highly diverse workforce, drawing talent from all over the world. There is a significant amount of evidence indicating that compensation practices and preferences differ substantially across cultures. For example, a recent study reported that Swedes often prefer additional time off for superior job performance, whereas Japanese workers prefer financial incentives based on group and company performance.
So how can an employer determine the best route to solving their employee retention and talent management issues in the long-run? It all goes back to understanding employee behavior.

http://www.piworldwide.com/Blog/Can-Money-Buy-You-Happiness-in-the-Workplace.aspx