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That’s not fair! Equity requires more than fair pay

by on
in Compensation and Benefits,Human Resources

Conventional wisdom says that paying employees well goes a long way toward making them feel like they’re treated fairly.

Not necessarily.

Employees don’t consider pay or salary increases as the top factor in determining whether they are rewarded fairly, according to a new study by WorldatWork and Hay Group. Some of the key findings:

Employees care (a lot) about career development. When asked about fairness of employee rewards in their organizations, employees point to “allocation of career development opportunities” as their No. 1 concern. Reason: They crave job growth and responsibility. Other fairness concerns in the top five: merit increases, base pay amounts, nonfinancial recognition and employee development/training.

Employees care more about internal fairness than external. Translation: Kevin in accounting is focused more on how his compensation and rewards compare with colleagues down the hall than down the street.

Fairness complaints are more frequent in larger organizations. Main reason: Small organizations have less formal reward systems that provide more of a personal touch.

Individual performance is the key. Compensation professionals say em­­ployees’ individual performance is the most important factor in determining how compensation is distributed fairly.

The report suggests the following ways to improve the perception of compensation and reward fairness:  

  • Establish effective ways to assess individual performance for merit in­­­­creases, promotions and advancement. As the report says, “Em­­ployees are more likely to be concerned about fairness issues if individual performance is not rewarded or recognized.”
  • Implement a strategy that rewards employees in similar jobs equally.
  • Communicate to employees the reasoning for rewards through several channels, including managers.

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