Employee perceptions of the fairness of work group incentive pay plans

Abstract

A field study investigated 368 employees' perceptions of the fairness of work group incentive pay plans. In particular, we studied the relationships between six antecedent variables (understanding of the pay plan, satisfaction with base pay, organizational commitment, beliefs in the pay plan effectiveness, plan payout amount, and group identification) and outcome variables, including fairness judgments of both the processes associated with the pay plan as well as the earned payout amounts. The setting for this study was a major nonunion production facility of a Fortune 500 company that is involved in chemical production. The findings indicate that understanding of the pay plan, belief in the pay plan effectiveness, and organizational commitment were related to perceptions of procedural justice. Moreover, pay satisfaction, understanding, 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 organizational tenure—on both perceptions of procedural and distributive justice.