Determinants of salary referents relevance: A field study of managers

Abstract

One of the greatest challenges in the area of pay management lies in making employees feel that they are fairly paid. Perceived pay fairness is an important determinant, not only of pay satisfaction (Berkowitz et al., 1987; Dyer, Schwab and Theriault, 1976; Folger and Konovsky, 1989; Sweeney and McFarlin, 1993; Weiner, 1980), but also of effort and performance at work (Lawler, 1971; Deckop, 1992; Milkovich and Newman, 1993; Tremblay and Kriber, 1994). Studies show that employees evaluate salary justice by comparing their wages and contributions with those of referent groups, such as other employees within, or outside, their own company (Lee and Martin, 1991; Martin and Lee, 1992; Ronen, 1986; Scholl et al. 1987; Tremblay and Kriber, 1994). Therefore, it becomes important to answer the following question: What variables influence the perceived relevance of the different referents in creating pay justice appreciation? Moreover, other authors (Miceli and Lane, 1991; Summers and DeNisi, 1990) point out the lack of studies on the determinants of pay justice perception, and particularly on the predictors of the perceived relevance of various referents in evaluating pay justice. A major limitation of the few existing studies is that they examine only a limited number of explanatory variables at a time. Our intention in this present investigation is to improve managers ' understanding of pay justice appreciation, and thereby indicate what action they might take to optimize it.