Employee Perceptions of the Fairness of Work Group Incentive Pay Plans

Abstract

A field study investigated 368 employees’ perceptions of the fair-ness of work group incentive pay plans. In particular, we studied therelationships between six antecedent variables (understanding of thepay plan, satisfaction with base pay, organizational commitment, beliefsin the pay plan eflectiveness, plan payout amount, and group identijication) and outcome variables, including fairness judgments of both theprocesses associated with the pay plan as well as the earned payoutamounts. The setting for this study was a major nonunion production facility of a Fortune 500 company that is involved in chemical produc-tion. The findings indicate that understanding of the pay plan, belief inthe pay plan effectiveness, and organizational commitment were relatedto perceptions of procedural justice. Moreover, pay satisfaction, under-standing, belief in the pay plan effectiveness, and organizational commitment were associated with perceptions of distributive justice.Further, we found significant effects of two control variables— job classification on perceptions of procedural justice, and organization altenure on both perceptions of procedural and distributive justice.