Each of us can answer the question, “Are you rewarded
fairly?” But when asked to clarify why we answered as we
did, it’s likely that our answers will be very different.
From the furor over executive compensation excesses to the
concerns for gender equity, the issue of fairness involves
many interconnected and complex aspects.
Reward fairness is the topic covered in research conducted
by Tom McMullen and Mark Royal, Ph.D. from the Hay Group,
in conjunction with Dow Scott, Ph.D. of Loyola University.
Some of the key findings of this research are outlined
Internal vs. External Equity – The 3 reward areas that
most employees focus on with respect to fairness are
(1) career development, (2) size of base pay, and
(3) increases to base pay. Internal equity concerns
typically outweigh external or market concerns.
Equitable vs. Equal Treatment – Equal is not necessarily
fair. The 3 components of fairness are:
#1 Distribution fairness of who gets what,
#2 Procedural fairness with a clear and consistent reward
#3 Interactional fairness which addresses working
relationships and culture within the company.
Good Communication vs. Transparency – In Finance, “Cash is
king.” In Employee Relations, “Communication is king.”
When it comes to addressing concerns about fairness,
transparency is not enough. Companies need to
aggressively communicate compensation philosophy and
HR POINTER: Compensation and reward fairness is a
complicated issue. Added to this complexity is the fact
that employees have their own ideas of fairness based on
their individual reference points.
Since it is impossible to meet individually-determined
fairness criteria, companies must specifically define and
regularly communicate their compensation and rewards
strategies to better manage employee perceptions of
For an overview of the aspects of internal equity in
compensation and reward programs, download our white paper
titled, “A Comprehensive Human Resource Program” at the