All’s Fair in Love and Rewards…or Maybe Not

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 below.

Internal vs. External Equity – The 3 reward areas that most employees focus on with respect to fairness are career development, size of base pay, and 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: distribution fairness of who gets what, procedural fairness with a clear and consistent reward methodology, and 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 reward principles.

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 fairness.

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 link below:

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