Salary in the system of rewarding employees directly affects their motivation, productivity and job satisfaction. There are different methods of motivation, but salary is the most important factor. An increase in wages in most cases also leads to an increase in labor productivity, but not always. Numerous theories that deal with motivational factors help managers understand how to motivate employees to work better and more efficiently by increasing their salaries. Numerous rewards and bonuses motivate employees to be more engaged at work. A good worker should be rewarded and given a salary supplement as proof of the value of his abilities. In addition to material compensation for the worker, intangible compensations are also important. The working atmosphere, working conditions, interpersonal relationships, fair rewards according to ability rather than suitability strongly affect worker satisfaction. If the employee is enabled to obtain material compensation from the share in the profit, he will certainly try to make the company do as well as possible, because the reward will be higher. A long-term and good worker should be rewarded with a loyalty reward and kept for as long as possible because that is the key to the success of any company. This thesis shows how the reward system affects employee motivation, motivational theories used by managers and which tangible and intangible compensations are used to better motivate employees. In addition to the theoretical part of the thesis, the method of determining salaries in civil services, increasing the basis for calculating salaries in the period 2017 to 2020 is also analyzed. By increasing the base, the salaries of civil servants also increase. The question was asked whether this salary increase accompanies the salary increase of all employees in the Republic of Croatia and how it affects the motivation of state employees. A survey was conducted among union members on the impact of salary increases on their motivation, and the increase in salaries was compared with the increase in salaries of total employees in the Republic of Croatia.