Equal or equitable pay? Individual differences in pay fairness perceptions

Abstract

This study examined how social comparison (i.e., comparing one's pay to similar others' pay) and deserved comparison (i.e., comparing one's pay to one's deserved pay) affect pay fairness perceptions, and the individual differences in the comparison processes. Results based on a field study with a sample of 167 employees showed pay fairness was low when employees received lower pay than a similar other (or what they deserved), increased as their pay exceeded that of a similar other (or deserved pay) to some extent, and then decreased when overpayment was considerable. Second, pay fairness increased as one's actual and similar others' pay levels both increased while pay fairness remained the same as one's actual and the deserved pay levels both increased. In addition, the “threshold” that people start to perceive overpayment as less fair occurred more quickly for those with higher preference for consistency in social comparison and for those with higher preference for the merit principle in deserved comparison. We also conducted experiments, and the results generally replicated the findings in the field study. These findings offer theoretical implications regarding organizational justice, as well as practical implications for designing and executing a compensation system.

Does pay for individual performance truly undermine employee creativity? The different moderating roles of vertical and horizontal collectivist orientations

“…Our findings also provide empirical evidence for CAT (Fulmer & Shaw, 2018), suggesting that employees with different cultural values make sense of and respond to the situational cues created by PFIP in different ways. Furthermore, our research findings concerning the moderating effects of vertical and horizontal collectivist orientations provide a microperspective for understanding the influence of individual cultural values on the effectiveness of organizational pay practices (Gerhart & Fang, 2014;Kim, Wang, Chen, Zhu, & Sun, 2019;Sanders et al, 2018).…”

“…SDT suggests that monetary rewards undermine intrinsic motivation when they diminish individuals' autonomous, relatedness, and competence perceptions; otherwise, there is no influence or even a positive effect when these basic human needs are strengthened by monetary rewards (Balkin, Roussel, & Werner, 2015;Deci et al, 2017;Gerhart & Fang, 2015). The existing empirical studies demonstrate that individual differences play a vital role in shaping how employees interpret monetary rewards (Kim et al, 2019). As a result, the relationship between PFIP and employee intrinsic motivation varies significantly among different groups of employees (Li et al, 2017;Malik et al, 2015).…”

“…The central tenet of CAT is that the motivational strength of pay systems depends on the extent to which the situational cues embedded within a particular pay practice fit individuals' fundamental social motives (e.g., selfprotection, affiliation, and status seeking). Given that individuals vary with respect to these social motives, pay practices may have different incentive effects on different employees (Kim et al, 2019). For instance, low pay levels (insufficient income) are most likely to activate self-protection motives among individuals who perceive themselves as vulnerable.…”

Measuring the gender pay gap: the complexity of HR metrics

“…The gender pay gap, which is one of the concerns of gender equality policies, is currently an important HR issue in Western countries (Bender and Pigeyre, 2016). Many companies are seeking to reduce it, for reasons of fairness and equity (Kim et al , 2019) and performance (Kossek and Buzzanell, 2018).…”

Development of tariff systems and their role in creat-ing a remuneration system

“…Basic wages meet the so-called acquiring function, they bind employees to the company. According to them, employees largely evaluate the fairness of remuneration systems (Kim et al, 2018). Therefore, the basic wage system should be a priority for companies and they should pay great attention to its creation (Femppel, 2005).…”