The shift to pay transparency: Undermet pay standing expectations and consequences

Abstract

SummaryThis research examines the shift from pay secrecy to transparency and seeks to improve the understanding of previously unrecognized negative consequences on job satisfaction. Drawing on undermet expectations research, we propose that shifting toward pay transparency decreases job satisfaction among employees who encounter negative discrepancies between expected and revealed pay standing (undermet pay standing expectations). Using data from field and experimental studies, we tested our hypotheses that episodic envy mediates the effect of undermet pay standing expectations on job satisfaction and that this indirect effect is moderated by victim sensitivity. Study 1 results suggest that undermet pay standing expectations lead to the predicted decrease in job satisfaction through episodic envy. In Study 2, we surveyed employees of a technology company before and after their shift to pay transparency and found partial support for our hypotheses, suggesting that episodic envy mediates the negative effects of undermet pay standing expectations on job satisfaction only for those low in victim sensitivity. Study 3 supported our overall model by illustrating that low victim sensitivity strengthened the negative indirect effects of undermet pay standing expectations on job satisfaction via episodic envy in an experimental study. We then discuss the implications for theory and practice.