Beware the Impact of Pay Injustice

This article examines three studies of how pay justice can affect employee behaviour. As the authors point out, previous research investigating justice has established four types of reward-related justice, namely:

  • The fairness of the actual rewards given to an individual, known as ‘distributive justice’;
  • Procedures used to determine reward decisions, known as ‘procedural justice’;
  • The way decisions and procedures are explained, known as ‘informational justice’; and
  • The way those that implemented the decisions treat the employee, known as ‘interpersonal justice’.

These types of justice have been found to be related to each other and different employee feelings and behaviours. The three studies reviewed examine how the perceived justice of compensation decisions affects pay satisfaction.

The first study, from the Journal of Managerial Psychology (Jawahar & Stone ,2011), looks at the relationship between the four types of justice and pay satisfaction. Similar to justice, pay satisfaction also has four distinct dimensions, namely satisfaction with: level; rises; benefits; and structure and administration.

The study has found that all aspects of justice are related to all aspects of pay satisfaction. However, some are more strongly related than others, namely, between informational justice and all types of satisfaction, while justice perceptions have the weakest relationship with satisfaction with pay increases.

The second study, also from the Journal of Managerial Psychology (Till & Karren, 2011), looks at the relationship between perceived justice and pay satisfaction, as well as how different aspects of fairness and perceived equity affect pay satisfaction. Equity is similar but is distinct from distributive justice. While distributive justice is the perceived fairness of the actual pay outcome, equity is the perceived fairness of pay decisions when held up against those of other employees. Three types of equity have been found to have an impact on employee attitudes and behaviours, namely:

  1. Internal: the perceived fairness of the employee’s pay compared with other employees in the same organisation that have different jobs.
  2. External: the perceived fairness of the employee’s pay compared to other employees in different organisations that have the same job.
  3. Individual: the perceived fairness of the employee’s pay evaluated against other employees in the same organisations and in the same job.

The research examines how these types of equity, as well as procedural and informational justice, affect pay level satisfaction with a sample of managers and executives. It finds that informational and procedural justice and all three types of equity are related to managerial and executive pay level satisfaction. Furthermore, perceived equity has a stronger effect on pay satisfaction than either procedural or informational justice. Of the three types of equity, individual equity has the strongest effect of pay satisfaction, followed by informational and procedural.

The final study, from the Journal of Applied Psychology (Judge & Cable, 2011), looks at the link between employee weight and pay. Based on two samples, one American and one German, the research finds that, even when controlling for various factors, the relationship between weight and pay differed between the genders, with the result that thinner women were found to earn more than those of average or heavier weight, whereas the picture reverses for men, where very thin men received less than those of average or heavier weight.

Examining the implications for practice, the reviewers believe the study shows that HR polices and the behaviours of reward professionals (and the managers of the employees) can affect pay satisfaction just as much as, and sometimes more than, the actual pay or benefits received.

While procedures used to determine pay should be fair and justifiable, they should also be communicated to employees so that they are perceived as such. Individuals should be given information about their pay and benefits and how it is determined in a way that is clear, truthful and comprehensive.

Reward professionals and line managers should communicate this information in a manner that is both professional and respectful. Doing so will tend to improve employee pay satisfaction and lead to other positive employee attitudes and behaviours. Given that employees place the most weight on individual equity, it is important that they believe that their pay is fair in comparison with others doing similar jobs. As a consequence, reward professionals should try to ensure that pay differences between employees in the same job are appropriate and justifiable. Finally, the researchers suggest that employers review their people management decisions to ensure that they do not inadvertently reflect biases around a person’s weight.

References

Jawahar, I.M. & Stone, T.H. (2011) Fairness, Perceptions and Satisfaction with Components of Pay Satisfaction. Journal of Managerial Psychology. 26(4), pp.297-312.

Till, R.E. & Karren, R. (2011) Organisational Justice Perceptions and Pay Level Satisfaction. Journal of Managerial Psychology. 26(1), pp.42-57.

Judge, T.A. & Cable, D.M. (2011) When It Comes to Pay, Do The Thin Win? The Effects of Weight on Pay for Men and Women. Journal of Applied Psychology. 96(1), pp.95-112.

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