Pay fairness and voluntary labor turnover

IT’S ALL ABOUT THE MONEY

Pay fairness and voluntary labor turnover

M. L. KLAWER

Student number: 1392409 Kelvinlaan 2 3553 HL Utrecht Telephone: 06-28411462 E-mail: mlklawer@yahoo.com

First University supervisor: Dr. P. H. van der Meer

Second University supervisor: Drs. J. van Polen

External supervisor: E. Dekker

Date: August 7, 2008

Zonder liefde, steun en toeverlaat wordt geen berg beklommen

Marlous Lucia Klawer

ABSTRACT

For an international sports organization in the Netherlands, I investigated if both perceived and actual pay fairness are related to voluntary labor turnover. 84 respondents completed a pay fairness perception questionnaire and additional pay related information was gained using the organization’s existing databank.

The hypothesized negative relationship between perceived external pay equity is partially supported: perceived external benefits equity has a negative influence on voluntary labor turnover, while perceived external salary equity has a positive influence on voluntary labor turnover, except when moderated by employee performance. The hypothesized negative relationship between perceived pay process fairness and voluntary labor turnover is fully supported. There is no significant relationship between actual external pay equity and voluntary labor turnover, except when it is moderated by perceived underpayment. Neither is there a significant relationship between actual pay process fairness and voluntary labor turnover, except when moderated by employee performance.

The results partially confirm the equity theory of Adams (1965) and fully confirm the procedural justice theory of Thibaut and Walker (1975).

I recommend the sports organization to enhance perceptions of external benefits equity

and pay process fairness through communication. Furthermore, I recommend increasing

employees’ market positions. Measures to change perceived external salary equity and actual

pay process fairness should be adjusted to employees’ performance ratings.

TABLE OF CONTENT

INTRODUCTION...9

THEORY ...11

Perceived pay fairness and voluntary labor turnover...11

Perceived pay distribution fairness...11

Perceived pay process fairness ...12

Successful versus unsuccessful employees ...13

Actual pay fairness and voluntary labor turnover ...13

Actual pay distribution fairness...13

Actual pay process fairness...14

Actual pay process fairness...14

Successful versus unsuccessful employees ...16

METHODS ...17

Respondents...17

Measures ...17

Perceived external pay equity ...17

Perceived pay process fairness ...18

Actual external pay equity ...18

Perceived under- or overpayment...19

Actual pay process fairness...19

Employee performance ...20

Voluntary labor turnover...20

Analysis ...20

RESULTS ...23

Perceived pay fairness and voluntary labor turnover...24

Successful versus unsuccessful employees ...25

Actual pay fairness and voluntary labor turnover ...26

Successful versus unsuccessful employees ...26

DISCUSSION ...31

Perceived pay fairness and voluntary labor turnover...31

Practical implications ...32

Actual pay fairness and voluntary labor turnover...33

Practical implications ...34

Successful versus unsuccessful employees...35

Limitations and future research...36

REFERENCES...39

APPENDIX 1...45

Pay fairness perception questionnaire ...45

INTRODUCTION

At an international sports organization

in the Netherlands, the Compensation and Benefits team wonders what it can do to reduce the organization’s voluntary labor turnover.

From June 2007 till March 2008 the overall labor turnover rate was 10.3%

. Compared to the local market where the labor turnover rate was around 17.3% (Centraal Bureau voor de Statistiek, 2007), the labor turnover rate of the sports organization is already quite low.

However, 68.6% of the employees who voluntarily left the sports organization were successful employees and therefore the sports organization still wants to reduce its labor turnover.

The Compensation and Benefits team of the sports organization is interested in how labor turnover is related to the compensation and benefits system they offer. As literature states that not the amount of pay but the fairness of pay determines labor retention or turnover (e.g. Fay

& Thompson, 2001; Shore, Tashchian, & Jourdan, 2006), the sports organization is now focusing on increasing perceived pay fairness. However, if increasing pay fairness perceptions does indeed reduce the sports organization’s labor turnover is not yet investigated. Therefore, the research question of my paper is: is there a relationship between perceived pay fairness and voluntary labor turnover at the sports organization? Some researchers (Ehrenberg & Smith, 1988: Gerhart & Milkovich, 1992) conclude that there also is a strong relationship between actual pay fairness and labor turnover. For perception and reality are not always congruent (Patchen, 1959: Adams, 1965), I will also investigate the following question: is there a relationship between actual pay fairness and voluntary labor turnover at the sports organization?

According to the procedural justice theory of Thibaut and Walker (1975) and the equity theory of Adams (1965) it is indeed important to enhance employees’ observation of fair compensation, because the degree to which employees perceive they are being compensated fairly influences their decision to stay or leave an organization (George & Jones, 2002; Noe, Hollenbeck, Gerhart, & Wright, 2006).

1 The organization requested anonymity in front of the study. Therefore, I refer to the organization by ‘sports organization’.

2 This percentage is based on 1361 employees, from which temporary employees are excluded.

THEORY

The equity theory and procedural justice theory state that pay fairness influences voluntary labor turnover. Pay fairness can be divided in distribution fairness and process fairness (Compensation Roundtable, 2006). Although Folger and Cropanzano (1998) state that distribution fairness and process fairness are related, the constructs do differ and seem to have different effects (Thibaut & Walker, 1975; Greenberg, 1990; Van Silfhout, 2000).

Therefore, I will describe their relationships with voluntary labor turnover separately.

As actual and perceived pay fairness might differ (Shore, et al., 2006), I will first describe the relationship between perceived pay fairness and voluntary labor turnover. Thereafter, I will describe the relationship between actual pay fairness and voluntary labor turnover.

Perceived pay fairness and voluntary labor turnover

Perceived pay distribution fairness The distributive justice theory focuses on the fairness of the allocations or outcomes that an employee receives (Folger & Cropanzano, 1998). The perceived fairness of allocations or outcomes (perceived distribution fairness) is determined by employees’ perceptions about their ratios of profits to investments compared to the ratios of their direct exchange partners. When an employee invests more in an exchange relationship than he or she gains from the exchange partner, he or she will perceive the distribution to be unfair (Homans, 1961: Adams, 1965).

Distributive unfairness can also be perceived by employees who feel their ratios of profits to investments are unequal to the ratios of other employees, with whom they are not in a direct exchange relationship. When employee A and employee B invest and perform the same, but the sports organization is rewarding employee A much higher, employee B will perceive distributive unfairness. In case of payment, this is called pay inequity (Adams, 1965).

The equity theory (Adams, 1965) focuses on the equity in an exchange relationship

including a third party, the referent. This referent can be an internal or external party (Shore,

et al., 2006), resulting in internal or external pay equity evaluations. Internal pay equity is the

equality of the employee’s compensation level compared to the compensation level of his or

her colleagues (Griffeth & Gaertner, 2001). External pay equity is the equality of the

organization’s compensation level compared to the level of compensation offered by its

competitors (Tudor & Trumble, 1997).

Equity theory shows that especially external pay inequity influences employees’ decision to leave an organization (Noe, et al., 2006; Scarpello & Jones, 1996; Dittrich & Carrell, 1976). Shore, et al. (2006) state that in case of external pay inequity, employees’ intentions to leave an organization are higher than in case of external pay equity or internal pay inequity.

Research from Scholl, Cooper, and McKenna (1987) confirm this relationship between external pay equity and turnover intentions. Furthermore, Scarpello and Jones (1996) show that external pay equity perceptions also predict actual voluntary labor turnover.

Although research regarding the relationship between external pay equity and voluntary labor turnover is mixed (Randall & Mueller, 1995; Scarpello & Jones, 1996; Griffith &

Gaertner, 2001), Fay and Thompson (2001) show that perceived pay fairness and voluntary labor turnover are negatively related. As perceived external pay equity is part of perceived pay fairness, I expect a negative relationship between perceived external pay equity and voluntary labor turnover (hypothesis 1).

Perceived pay process fairness The procedural justice theory of Thibaut and Walker (1975) focuses on the fairness of procedures on which decisions are based. Procedural justice is “the perceived fairness of the policies and procedures used to make decisions” (Greenberg, 1990: 402). Process fairness (procedural justice) regarding pay can be described as the fairness of the procedures used in administering pay (Schaubroeck, May, & Brown, 1994).

According to Scarpello and Jones (1996), pay process fairness is determined by four aspects of the pay process: pay determination (job evaluations and pay raise criteria); performance appraisal (performance evaluation processes); pay communication (communication about various compensation issues); appeal (solution mechanisms for disagreements about pay).

Perceived pay process fairness contributes to perceived pay fairness, even if external pay inequity is perceived (Homans, 1974): employees perceive unequal pay raises as fair when the process which leads to the unequal pay raises is perceived as fair. When the process determining pay raises depends on employee performance and the performance of the employee receiving a lower pay raise is less well than his or her colleague, the employee will perceive his or her lower pay raise as fair and react more positively to the lower pay raise (DeConinck & Bachmann, 2007).

Jones (1998) found that when employees perceive the pay process to be fair, they are less

likely to leave the organization. Parker and Kohlmeyer (2005) studied the relationship

between perceived procedural justice of organizational rewards and labor turnover and found

that perceptions of bias in the allocation process are related to high turnover intentions.

As research shows a negative relationship between perceived procedural reward justice and labor turnover intentions (Parker & Kohlmeyer, 2005), I expect a negative relationship between perceived pay process fairness and voluntary labor turnover (hypothesis 2).

Successful versus unsuccessful employees

Although retention of employees is an important issue, an organization wants to retain only the successful employees and not the unsuccessful (Cascio & Aguinis, 2005). Can pay fairness contribute to turnover reduction of successful employees, while remaining the same turnover rate of unsuccessful employees?

Researchers (Gerhart & Milkovich, 1992; Trevor, Gerhart, & Boudreau, 1997; Fay &

Thompson, 2001) focused on the relationship between (un-) successful employees and perceived pay fairness or on the relationship between turnover of high performers and performance-reward contingencies. However, I have found no research studying the influence of employee performance on the relationship between pay fairness and voluntary labor turnover. Taking into account that there is little empirical research about the effects of pay fairness (Shaw & Gupta, 2001), this is not surprising.

However, turnover of successful employees might be more affected by perceptions of pay fairness, for they, due to their great performance, probably have greater opportunities to leave the organization and find employment elsewhere. Furthermore, for they do perform well, successful employees might expect fair pay in return. Unsuccessful employees might also want to leave an unfairly paying organization, but might fail to find employment outside the current organization, due to their lack of competencies. Furthermore, since they do not perform well and in that regard do not offer the organization anything, unsuccessful employees might feel they have no right to judge the organization’s failure in pay fairness.

Therefore, I expect that the negative relationship between perceived pay fairness and voluntary labor turnover is moderated by employee performance (hypothesis 3).

Actual pay fairness and voluntary labor turnover

Actual pay distribution fairness Shore, et al., (2006) show that actual external pay equity

and perceived external pay equity might differ. Therefore, I am also interested in the

relationship between actual distribution fairness and voluntary labor turnover.

External pay inequity can be the result of under- or overpayment. However, the motivation of employees to restore equity differs according to if employees are under- or overpaid (Homans, 1974). In case of external underpayment, employees are more likely to leave an organization than in case of external overpayment (Dansereau, Cashman, & Graen, 1973). When you are overpaid in the current organization, leaving the organization seems a less optimal option and Shore (2004) shows that overpaid employees are less likely to leave the organization. Restoring equity in other ways, for instance by putting more effort in the work, (Adams, 1965) seems more beneficiary for overpaid employees.

Moreover, employees who get overpaid fail to a greater extent to realize that there is inequity than employees who are underpaid (Adams, 1965). Shore, et al. (2006) found that externally over rewarded employees and externally equally rewarded employees perceive the highest levels of pay fairness. For perceptions of under- or overpayment result in different reactions (Homans, 1974; Dansereau, et al., 1973; Shore, 2004), the perception of being under- or overpaid might influence the relationship between actual external pay equity and voluntary labor turnover.

For both under- and overpayment elicit negative feelings (Livingstone, Roberts, &

Chonko, 1995) I expect that there is a negative relationship between actual external pay equity and voluntary labor turnover (hypothesis 4). However, I expect that the negative relationship between actual external pay equity and voluntary labor turnover is moderated by perceived under- or overpayment (hypothesis 4a).

Actual pay process fairness Procedural justice is about the perceived fairness of the policies or procedures (Greenberg, 1990), and according to my knowledge, research has never focused on the effects of actual procedural pay fairness (e.g. Folger & Konovsky, 1989;

Aquino, 1995; DeConinck & Stilwell, 2004). However, a policy or procedure can be fair while it is perceived to be unfair (Homans, 1974).

To gain some insight in the fairness of the pay process at the sports organization, I

describe how the sports organization deals with the four aspects of the pay process (pay

determination, performance appraisal, pay communication, and appeal) and control whether

the pay process is fair according to literature about pay process fairness. I also investigate

whether actual pay process fairness indeed influences voluntary labor turnover. For pay

process fairness should lead to more engagement (Compensation Roundtable, 2006), I expect

that there is a negative relationship between actual pay process fairness and voluntary labor

turnover (hypothesis 5).

Pay determination consists of job evaluations and pay raise criteria (Scarpello & Jones, 1996). To evaluate the relative worth of a job, the sports organization takes job skills, team contribution (cooperation, leadership, etc.), creativity and judgment, and impact into account.

Job evaluation based on these compensable job factors is common practice among organizations and leads to fair job evaluations (Lowe & Wittig, 1989). After evaluation, the job is categorized in a position within a band. The bands in which positions are categorized set the upper and lower limits of base pay. The sports organization strives to pay employees in conformity with the market median and therefore market values of the jobs are benchmarked against other companies. With an annual bonus, which is performance dependent, employees can increase their salaries to higher market positions.

The annual pay raise in the sports organization is also based on performance: if the employee performs properly or even excels, his/her pay raise will be larger than when the employee performs unsatisfactory. In addition to the annual pay raise, managers have the ability to provide developmental pay raises to employees who perform well, are in the same job for a while, and whose market positions are fairly low. Both the annual pay raise as well as the developmental pay raise include employee performance as pay raise criteria. Including employee performance in pay determination results in fair pay determination within the sports organization (Jones, Scarpello, & Bergmann, 1999). However, performance appraisal should be accurate in order for performance related pay to be fair (Scarpello & Jones, 1996).

Performance appraisal is the process by which to evaluate performance (Scarpello &

Jones, 1996). The appraisal system of the sports organization requires managers and their

employees to set annual goals and to regularly monitor the progression towards reaching the

goals during the year. Defining and communicating performance goals and evaluation

criteria, as the sports organization does during the annual goal setting and regularly

progression monitoring, contributes to the fairness of performance appraisal (Leventhal,

1976). At the end of the year, the manager rates the performance of his or her employees

using a forced distribution. Rating performance based on a forced distribution means that the

performance of the employee is determined in comparison to other employees and thus the

performance rating is relative in stead of absolute. Using a forced distribution to rate

performance will reduce process fairness perceptions (Compensation Roundtable, 2006), as

will not involving employees in determining their performance rating. However, the forced

distribution of the sports organization is more like a guideline and minor deviations from it

are allowed. Moreover, employees are not completely excluded from performance rating

determination, as they do have regular communication about their progressions during the

year. As regular communication increases the fairness of performance appraisal (Greenberg, 1986), the performance appraisal system of the sports organization is quite fair.

In general, pay communication enhances pay process fairness (Compensation Roundtable, 2006). At the beginning of the employment at the sports organization, or in case of major compensation changes in the organization, the employee is informed about pay related issues by the Compensation and Benefits department, both in paper and via meetings.

Also, a lot of information about compensation and benefits (e.g. discussions, examples, the pay philosophy) can be found on the intranet. However, the main pay communicator is the manager, who is responsible for continuous pay and performance communication. By depending almost solely on managers for pay communication, pay communication can be done greatly or badly, depending on the manager’s communication attitudes and skills. Great differences in the fairness of pay communication between managers can exist, which reduces the consistency in communication procedures, resulting in reduced fairness (Jones, et al., 1999).

When pay communication is not fair, disagreements between managers and their employees about pay related issues are more likely (Leventhal, 1976; Greenberg, 1986).

There is an Employee Relations department at the sports organization which provides advice about employee relations to both managers and employees. However, managers or Human Resource managers have to raise employees’ awareness of the help Employee Relations provides. Employees are in this way not knowledgeable that they can by-pass the manager with whom they are in disagreement. Moreover, within the sports organization there is no formal, clearly communicated solution mechanism for pay disagreements (appeal). This reduces the fairness of the appeal procedures (Sweeney & McFarlin, 1993; Leventhal, 1976).

In conclusion, the pay process of the sports organization is not completely fair. Pay determination and performance appraisal within the sports organization are fair. However, pay communication, appeal, and also the performance rating determination can be either fair or unfair, depending on the managers’ communication skills.

Successful versus unsuccessful employees

Based on the same reasoning as with perceived pay fairness, I expect that the negative

relationship between actual pay fairness and voluntary labor turnover is moderated by

employee performance (hypothesis 6).

METHODS Respondents

The respondents were 42 ex-employees who voluntarily left the sports organization and 42 current employees. I matched the current employees with the ex-employees in regard to band (99% match), department (95% match), gender (100% match), age (98% match) and years of service (99% match) in order to control for the influence of these variables on the independent and dependent variables. 31% of the respondents was male, 69% of the respondents was female. The average age of the respondents was 30-34 years old and the average years of service was 2-3 years. It appeared that employees with few years of service were overrepresented in my sample.

Measures

Respondents were asked by telephone to fill in the pay fairness perception questionnaire (appendix 1) of which a link was sent by e-mail after confirmation. Existing data about their performance and about the actual external pay equity was gathered after the respondent completed the survey. This information was already available in the organization. All respondents were willing to participate, however, four ex-employees and ten current employees did not complete the survey.

Table 1 (page 18) shows the descriptive statistics of the independent and moderator variables. Also, the reliability coefficients of the measurement scales are provided.

Perceived external pay equity Perceived external pay equity is measured with an adjusted

version of the external pay equity scale of Livingstone, et al. (1995). The adjusted external

pay equity scale measures four aspects of pay equity (external raise equity, external benefits

equity, external incentive equity, and external salary equity). An example of an item

measuring perceived external pay equity is: “Given my contributions/investments, my annual

salary is fair compared to annual salaries in other companies”. “Given my

contributions/investments” is an addition which is taken from Van Silfhout’s (2000) items

measuring perceived pay equity.

The four items were measured on a 7-point Likert-scale with 1= strongly disagree and 7=

strongly agree. The items did not result in a reliable scale ( = 0.55). Based on content, I included the item regarding external salary equity in the analysis. I also included the item regarding benefits, because this item significantly correlated with voluntary labor turnover (r

= -0.21, p < 0.10). The higher the score, the higher perceived external salary or benefits equity. Perceived external salary and benefits equity were included separately in the analysis.

Perceived pay process fairness Perceived pay process fairness is measured by an adjusted version of the procedural fairness measure developed by Scarpello and Jones (1996), measuring the four aspects of pay process fairness. Examples of items of the procedural fairness measure are “This is how I feel about the fairness of the procedures for determining the pay for my job”, and “This is how I feel about the fairness of the procedures for communicating pay issues which are of direct concern to me”.

The 12 items were measured on a 7-point Likert-scale with 1= very unfair and 7= very fair (Fields, 2002), and resulted in a reliable measurement scale ( = 0.86). To obtain the overall score of perceived pay process fairness, average scores were measured. The higher the mean score, the higher the perceived pay process fairness.

Actual external pay equity To determine if current and ex-employees of the sports

organization were paid equally to the external market, I gathered existing data about the

height of the employees’ pay compared to the external market. The employees’ individual

pay is divided by the pay of employees in benchmarked companies. Equally paid employees got a 1, employees who are underpaid got scores below 1 and overpaid employees got scores above 1. In order to create a linear curve, I used the logarithms of actual external pay equity.

The scale of logarithms ranged from -0.16 till 0.09 with a mean of -0.04. In order to align the scale with the other measurement scales, I multiplied the logarithms by 10.

Perceived under- and overpayment Employees’ perceptions of under- and overpayment were measured by items like “Other companies in my industry pay lower annual salaries than the sports organization does”, and “Other companies in my industry pay higher annual salaries than the sports organization does” (Livingstone, et al., 1995). The eight items were measured on a 7-point Likert-scale with 1= strongly disagree and 7= strongly agree. Four items measured perceived underpayment; the other four items measured perceived overpayment. Perceived underpayment and perceived overpayment were included separately in the analysis.

The four items measuring underpayment resulted in an unreliable scale ( = 0.52). When the item regarding benefits underpayment was deleted, the other three items resulted in an underpayment scale with a reliability of 0.60. As the sample is not very large, I regarded this to be reliable. The items measuring overpayment resulted in a reliable scale ( = 0.70).

To obtain the overall scores of perceived under- and overpayment, average scores were measured. The higher the mean scores, the more under- and overpaid the employee perceived him- or herself to be.

Actual pay process fairness Only one aspect of actual pay process fairness is included in the analysis, namely pay communication by managers. Only this item can result in spread, as the other variables are constant across one organization. Pay communication by managers is measured by three items which should provide insight in the relationship between actual pay process fairness and voluntary labor turnover. The first item (times discussed) is “In the past 12 months, how often did your manager discuss your pay with you?”. The other questions were yes or no questions and measured whether the manager had been able to make it understandable how the employee’s pay was determined (understandable pay) and whether the manager discussed the employee’s future pay potential with him or her (future pay).

Tables 2, 3, and 4 (page 16) show the partitioning of the answers of the respondents on the

three items. The three items were included separately in the analysis, as they did not result in

a reliable scale ( = 0.50).

Employee performance The performance of the respondents was already rated by their supervisors during the annually performance assessments. The performance scale ran from too new to rate (0), unsatisfactory (1), inconsistent (2), successful (3), highly successful (4), to exceptional (5). In case employees were not rated, they got a 0.

Voluntary labor turnover Ex-employees who voluntarily left the sports organization got a 1 and current employees got a 0. Employees who left the sports organization involuntarily were not included in the study.

Analysis

To test the hypotheses, I ran multiple binary logistic regression analyses in SPSS (Moore

& McCabe, 2003). However, I first checked whether the assumptions of a binary logistic regression analysis were met (De Vries & Huisman, 2007a; De Vries & Huisman 2007b).

Thereafter, I computed the interaction variables (perceived external salary equity x employee performance; perceived external benefits equity x employee performance;

perceived pay process fairness x employee performance; actual external pay equity x employee performance; perceived underpayment x actual external pay equity; perceived overpayment x actual external pay equity; times discussed x employee performance;

understandable pay x employee performance; future pay x employee performance).

As all of the assumptions were met and all interaction variables were created, I ran the

binary logistic regression analyses (De Vries & Huisman, 2007a). I calculated proportions of

explained variation by the following formula (De Vries & Huisman, 2007a):

Proportion explained variation = Chi-square model / -2 Log likelihood.

The directions of the significant moderator effects were investigated by the Interactive

Graph-procedure, which graphically shows the relationships. Employees who scored below 4

on perceived underpayment were categorized as the group of employees with no or weak

underpayment perceptions; employees who scored above 4 were categorized as the group

with strong underpayment perceptions.

RESULTS

The correlations between the independent, moderator and dependent variable are shown in table 5 (page 24).

Perceived external salary equity correlated significantly with all independent and moderator variables, except with future pay (r = -0.07, n. s.). Perceived external salary equity was highest when a manager did not often discuss pay (r = -0.19, p < 0.10), but did make it understandable how the employee’s pay is determined (r = 0.23, p < 0.05). Moreover, when a manager was able to make it understandable how the employee’s pay is determined, the employee perceived the pay process to be fairer (r = 0.48, p < 0.01). Also, there was a positive correlation between understandable pay and actual external pay equity (r = 0.21, p <

0.10).

Perceived external salary equity also correlated with perceived under- and overpayment.

When employees perceived that they were underpaid, they did not perceive their salary to be equal compared to the salary offered by external organizations (r = -0.34, p < 0.01).

However, when employees perceived they were being overpaid, they perceived their salary to be equitable (r = 0.30, p < 0.01). Employees who got overpaid also perceived that they were overpaid (r = 0.21, p < 0.10), and employees perceived their salary to be more equitable as it increased compared to the external market (r = 0.26, p < 0.01).

Perceived external salary equity also correlated significantly with employee

performance: as the employee performed better, he or she perceived his or her salary to be

less equitable (r = -0.25, p < 0.05). Perceived external salary equity however did not correlate

significantly with voluntary labor turnover (r = 0.04, n. s.). Only perceived external benefits

equity (r = -0.21, p < 0.10) and perceived pay process fairness (r = -0.24, p < 0.05) correlated

significantly with voluntary labor turnover. Except for perceived external salary equity,

future pay (r = 0.03, n. s.), and employee performance (r = 0.00, n. s.), all variables,

significant or not, correlated negatively with voluntary labor turnover.

Perceived pay fairness and voluntary labor turnover

To provide an answer on the question if there is a relationship between perceived pay fairness and voluntary labor turnover, I tested if perceived external pay equity and perceived pay process fairness were related to voluntary labor turnover. I expected that there were negative relationships between perceived external pay equity and voluntary labor turnover (hypothesis 1), and between perceived pay process fairness and voluntary labor turnover (hypothesis 2). The results are shown in table 6 (page 25).

Perceived external pay equity was divided in perceived external salary equity and perceived external benefits equity. Perceived external salary equity did not significantly influence voluntary labor turnover, except when both perceived external benefits equity and perceived pay process fairness were included. Then, perceived external salary equity influenced voluntary labor turnover positively (B = 0.52, p < 0.05). Perceived external benefits equity influenced voluntary labor turnover negatively (B = -0.33, p < 0.10). As both factors of perceived external pay equity influenced voluntary labor turnover in a different direction, hypothesis 1 is only partially supported.

Perceived pay process fairness influenced voluntary labor turnover negatively (B = -0.60, p < 0.05). Therefore, hypothesis 2 is supported.

Perceived pay fairness explained 14% (p < 0.01) of the variation in voluntary labor

turnover.

Successful versus unsuccessful employees I also tested if the relationship between perceived pay fairness and voluntary labor turnover was moderated by employee performance (hypothesis 3). The results are also shown in table 6.

Employee performance moderated the relationship between perceived external salary equity and voluntary labor turnover (B = 0.31, p < 0.05). For employees who were not rated/too new to rate, the influence of perceived external salary equity on voluntary labor turnover was negative, while it was positive for successful and highly successful employees.

Moreover, employee performance had a direct, negative influence on voluntary labor turnover (B = -1.16, p < 0.05) and the addition of employee performance as a moderator resulted in a negative influence of perceived external salary equity on voluntary labor turnover (B = -0.72, p < 0.10).

Employee performance did not moderate the negative relationships between perceived external benefits equity and voluntary labor turnover, and between perceived pay process fairness and voluntary labor turnover.

The analysis including perceived pay fairness, employee performance, and the interaction

variables explained 24% (p < 0.01) of the variation in voluntary labor turnover.

Actual pay fairness and voluntary labor turnover

To provide an answer to the question if there is a relationship between actual pay fairness and voluntary labor turnover, I tested if actual external pay equity and actual pay process fairness were related to voluntary labor turnover. I expected a negative relationship between actual external pay equity and voluntary labor turnover (hypothesis 4) and I expected this relationship to be moderated by perceived under- and overpayment (hypothesis 4a).

Furthermore, I expected a negative relationship between actual pay process fairness and voluntary labor turnover (hypothesis 5). The results are shown in table 7 (page 28 and 29).

Actual external pay equity did not significantly influence voluntary labor turnover.

Therefore, hypothesis 4 is not supported. However, there is a significant interaction effect between actual external pay equity and perceived underpayment (B = -0.15, p < 0.10). When employees had strong perceptions of underpayment, there was a negative influence of actual external pay equity on voluntary labor turnover. When they had no or weak perceptions of underpayment, actual external pay equity influenced voluntary labor turnover positively.

There was no significant interaction effect between perceived overpayment and actual external salary equity. However, both perceived under- and overpayment significantly influenced voluntary labor turnover directly (B = -1.09, p < 0.05, respectively B = -1.07, p <

0.10). As only perceived underpayment and not perceived overpayment moderated the relationship between actual external pay equity and voluntary labor turnover, hypothesis 4a is partially supported.

There was no significant influence of actual pay process fairness on voluntary labor turnover. Therefore, hypothesis 5 is not supported.

The proportion explained variation by actual pay fairness was 0.05 (n. s.). The analysis including actual external pay equity and perceived under- and overpayment as moderators explained 9% (p < 0.10) of the variation in voluntary labor turnover.

Successful versus unsuccessful employees At last, I also tested whether the expected relationship between actual pay fairness and voluntary labor turnover was moderated by employee performance (hypothesis 6). The results are shown in table 7 (page 28 and 29).

Employee performance only moderated the relationship between understandable pay and

voluntary labor turnover (B = -0.77, p < 0.05). Employees who were too new to rate/not rated

showed a negative influence of understandable pay on voluntary labor turnover. This

negative influence was not shown for successful employees and a slightly positive influence of understandable pay on voluntary labor turnover was found for highly successful employees. As employee performance did not moderate the other relationships of actual pay fairness with voluntary labor turnover, hypothesis 6 is only partially supported.

The analysis including actual pay fairness, perceived under- and overpayment, employee

performance, and the interaction variables explained 30% (p < 0.05) of the variation in

voluntary labor turnover.

DISCUSSION Perceived pay fairness and voluntary labor turnover

Based on research (e.g. Scholl, et al., 1987; Griffith & Gaertner, 2001) and the equity theory of Adams (1965), I expected that when employees perceive external salary and benefits equity, they are less likely to leave the sports organization than when they perceive external pay inequity. This seems only partially true. Employees are less likely to leave the sports organization when they perceive their benefits to be equal to benefits offered by external organizations, but they are slightly more likely to leave the sports organization when they perceive their salary to be equal to salaries offered by external organizations. However, only successful or highly successful employees tend to leave the sports organization when they perceive their salary to be equal to salaries offered by external organizations; employees who were too new to rate/not rated tend to leave the sports organization when they perceive external salary inequity.

One explanation for the different influence of perceived external salary equity on voluntary labor turnover for too new to rate/not rated employees and successful or highly successful employees, might be that current employees who are successful or highly successful rated their external salary equity perceptions more negatively, hoping that it would encourage their managers to increase their pay. Employees who are too new to rate/not rated have probably just had their pay negotiations and are therefore less likely to rate their perceptions of perceived external salary equity more negative, hoping for a pay raise.

Another explanation is that humans normally tend to think they have it worse than others (Schneider, 1976), as the proverb ‘the grass is always greener on the other side of the hill’

shows. Current employees might therefore have more negative perceptions than ex-employees, who are now at the other side of the hill and notice that it is not greener. However, current employees who are too new to rate/not rated do not have more negative perceptions than ex- employees because they probably have just been looking at the other side of the hill.

Longitudinal research could exclude the influences of the negativity and green-grass biases of current employees on the relationship between perceived external salary equity and voluntary labor turnover.

I doubt whether perceived external salary equity did indeed measure equity perceptions.

Respondents who perceived they were overpaid also perceived more external salary equity,

while it should have been that respondents who perceived they were overpaid did not perceive

their salary to be equal to salaries offered by external organizations. Therefore, I think that perceived external salary equity did not measure what it was supposed to. Moreover, the four items measuring perceived external pay equity did not result in a reliable scale. Future research should focus on developing a valid and reliable measure for perceived external pay equity.

Perceived pay process fairness influences voluntary labor turnover negatively, thereby supporting the procedural justice theory of Thibaut and Walker (1975). When employees perceive the pay process to be fairer, they are less likely to leave the sports organization. As perceived pay process fairness has a clear, negative influence on voluntary labor turnover, regardless of employee performance, improving the perceived fairness of the pay process could help the sports organization in reducing voluntary labor turnover.

To conclude, perceived pay fairness influences voluntary labor turnover. However, the direction of the influence depends on the construct of perceived pay fairness (perceived external salary equity, perceived external benefits equity, and perceived pay process fairness).

Practical implications I doubt if perceived external salary equity really has a positive influence on voluntary labor turnover, as explained above. Moreover, perceived external salary equity probably influences other employee behaviors and attitudes than voluntary labor turnover, for instance efforts, intentions to search for another job, and absenteeism (Adams, 1965; Shaw & Gupta, 2001). Therefore, I recommend not trying to decrease employees’

external salary equity perceptions.

As perceived external benefits equity reduces voluntary labor turnover, I recommend the sports organization to offer the same benefits as external organizations offer and to communicate to employees that they are offered the same benefits as external organizations offer.

Research (Compensation Roundtable, 2006; McFarlin & Sweeney, 1992) shows that perceived pay process fairness is more critical in determining overall perceived pay fairness and in decreasing voluntary labor turnover than perceived external pay equity.

Pay process fairness perceptions are for 62% composed by pay communication

(Compensation Roundtable, 2006). Pay communication shows the employee that the

organization is interested in his or her well-being, which stimulates psychological commitment

to the organization and a stable employment relationship (Jones, et al., 1999). Therefore, the

sports organization should focus on improving its pay communication. By implementing the

following recommendations, based on research from the Compensation Roundtable (2006) and

Brockner (2006), pay communication will improve:

• Emphasize, as Compensation and Benefits team, the overall compensation and benefits picture, with a focus on the link between pay, performance, and organization strategy.

• Acknowledge that you as Compensation and Benefits team, do the best you can to provide employees with a good compensation and benefits package, but that faults and flaws can occur. Employees deal better with negative experiences when they know negative experiences might happen.

• Communicate changes in compensations and benefits through in-person meetings.

• Provide training to managers in which they learn how to communicate pay related issues to their employees. For instance, learn them to explain employees how pay and performance decisions are made and provide managers with tools and information that help them make good pay and performance decisions.

• Provide managers with concise, detailed information about compensation and benefits, and reward them for people management and leadership skills.

Improving pay communication can increase perceived pay process fairness, thereby reducing voluntary labor turnover. However, further increases in perceived pay process fairness can be obtained by improving the fairness of the actual pay process (Compensation Roundtable, 2006). I return to this point later.

Actual pay fairness and voluntary labor turnover

The results show that actual external pay equity does not influence voluntary labor turnover, thereby not confirming Adams equity theory. However, when employees have strong perceptions of underpayment, they are more likely to leave the sports organization when their market positions are actually low. Overpayment does not moderate the relationship between actual external pay equity and voluntary labor turnover, while underpayment does, which confirms research from Dansereau, et al. (1973) and Shore (2004).

Although actual pay process fairness does not influence voluntary labor turnover directly,

research (Schaubroeck, et al, 1994; Greenberg, 1990; Sweeney & McFarlin, 1993) shows that

improving the actual pay process improves perceived pay process fairness, which reduces

voluntary labor turnover. Moreover, understandable pay influences voluntary labor turnover

when moderated by employee performance. Employees who are too new to rate/not rated tend

to leave the sports organization when the manager does not make it understandable how their

pay is determined. Successful employees’ decision to leave the sports organization is not

impacted by understandable pay; highly successful employees tend to leave the sports organization when the manager makes it understandable how their pay is determined. Highly successful employees might perceive pay determination as less fair than employees who are too new to rate/not rated, resulting in highly successful employees who understand how their pay is determined leaving the sports organization. Future research could focus on how fair the pay process of the sports organization is for different performance groups.

Moreover, I only investigated the influence of pay communication fairness on voluntary labor turnover. Future research should focus on the influence of the fairness of the whole actual pay process on voluntary labor turnover.

Practical implications The sports organization’s voluntary labor turnover rate can be reduced by increasing employees’ actual pay to equalize it to pay offered by external organizations. Although employees who do not perceive they are (much) underpaid tend to leave the sports organization when they are paid equal/high compared to pay offered by external organizations, most employees perceive they are underpaid. For this large group of employees who perceive they are underpaid it shows that they leave the sports organization when their pay actually is low compared to pay offered by external organizations, but not when their pay is equal or high compared to pay offered by external organizations.

Moreover, the sports organization has a value stating to “do the right thing”, and paying employees more fairly compared to the external market is in line with this value. As it is the right thing to do and reduces voluntary labor turnover of at least those employees who perceive they are underpaid, I recommend the sports organization to increase employees’ pay, as most of them are paid low compared to pay offered by external organizations.

The voluntary labor turnover rate of the sports organization might further be reduced by improving managers’ ability to make it understandable to employees who are too new to rate/not rated how their pay is determined.

Based on the actual pay process of the sports organization and its fairness according to literature concerning pay process fairness, I advise the sports organization to implement the following recommendations, which should improve the fairness of the sports organization’s pay process. My recommendations are:

• Remove the use of a forced distribution to rate employee performance (McBriarty,

1988). Managers must discuss their ratings with each other and agree mutually on

employees’ performance ratings (Lawler III, 2003).

• Involve employees in determining their performance ratings (Brockner, 2006). Give them the opportunity to express their feelings during evaluation, enable them to discuss their performance rating with their managers, provide the opportunity to rebut and review the performance rating, and explain clearly the reasoning behind the employee’s performance rating (Greenberg, 1990; Folger & Cropanzano, 1998; Schaubroeck, et al., 1994).

• Enhance consistency in pay communication of managers by providing standards on how to communicate and communication training and by conducting after-action reviews (Jones, et al., 1999; Newman & Milkovich, 1990; Brockner, 2006).

• Create easy to use and safe appeal procedures (Newman & Milkovich, 1990; Brockner, 2006). The procedures should be short and communicated clearly throughout the organization in order to enable the employee to by-pass his or her manager when in disagreement about pay related issues (Leventhal, 1976).

Successful versus unsuccessful employees

I checked whether the relationship between pay fairness and voluntary labor turnover was moderated by employee performance. However, only one respondent could be identified as inconsistent, the other respondents were successful, highly successful, exceptional, or too new to rate/not rated. Therefore, no conclusions can be drawn about whether pay fairness can contribute to reducing voluntary labor turnover of successful employees, while not reducing voluntary labor turnover of unsuccessful employees.

I did find some differences between employees who are too new to rate/not rated and successful or highly successful employees, as mentioned above. The knowledge that perceived external salary equity and understandable pay have different effects on the voluntary labor turnover rate of the different employee groups, could be used to reduce voluntary labor turnover by adjusting implementations and solutions to the performance rating of the employee.

Employees who are too new to rate/not rated should be approached differently regarding

perceived external salary equity and understandable pay than employees who are successful or

highly successful, in order to reduce the sports organization’s overall voluntary labor turnover

rate.

Limitations and future research

To conclude, my research shows that perceived pay fairness influences voluntary labor turnover, while actual pay fairness only influences voluntary labor turnover when moderated by either employee performance or perceived underpayment. Perceived pay fairness therefore seems a stronger determinant of voluntary labor turnover than actual pay fairness, which confirms Shore, et al.’s (2006) notion that perceived and actual pay fairness differ.

The proportion of explained variation in voluntary labor turnover through perceived pay fairness is only 0.14. Although logistic regression analysis tends to underestimate the fit of the model (De Vries & Huisman, 2007a), still a great proportion of variation in voluntary labor turnover remains unexplained. Therefore, other predictors of voluntary labor turnover should be investigated, like non-monetary incentives, realistic job previews, family-friendly policies, affectivity, self-evaluations, task complexity, role overload, work-life balance, development opportunities, etcetera (Garger, 1999; Cascio & Aguinis, 2005; Noe, et al., 2006). Future research should focus on creating a complete picture of the predictors of voluntary labor turnover in order to reduce it. Since especially new employees seem to leave the sports organization, I advice the sports organization to investigate the influence of the recruitment and selection process of the sports organization on its voluntary labor turnover.

Research of Scarpello and Jones (1996); Dittrich and Carrell (1976) shows that especially perceived external pay equity influences voluntary labor turnover. Therefore, I included perceived external pay equity as the measure to represent perceived pay distribution fairness.

However, research from Towers & Perrin (2007) shows that especially internal pay equity is important in retaining employees. Although retention and turnover are not synonyms, future research should include internal pay fairness as well. Moreover, as results regarding distributive pay fairness are mixed (Griffith & Gaertner, 2001; Randall & Mueller, 1995), more elaborative research on this topic is needed. Therefore, future research should include other kinds of equity, like equity based on needs or equality (Leventhal, 1976).

The focus of my research was reducing voluntary labor turnover, as the sports organization feels their voluntary labor turnover rate is fairly high. Around eleven people each month leave the sports organization voluntarily. Relatively seen, this number is quite low compared to the local market (Centraal Bureau voor de Statistiek, 2007). Moreover, labor turnover is not always dysfunctional and can even be beneficial for an organization (Dalton, Krackhardt, &

Porter, 1981). Although Abelson and Baysinger (1984: Glebbeek & Bax, 2004) developed an

analysis tool to determine how much labor turnover is beneficiary, this analysis tool lacks

practical use (Glebbeek & Bax, 2004). Therefore, future research should focus on developing a practical tool to determine the optimal level of voluntary labor turnover and on the consequences of different levels of voluntary labor turnover.

One consequence of voluntary labor turnover is that valuable knowledge is lost (Boxall &

Purcell, 2003), especially when the employees who leave the organization are successful. As

labor markets are continuing to decrease, employee mobility increases (Cascio & Aguinis,

2005) and the labor turnover problem will only become larger. Therefore, more research needs

to be done on how to reduce voluntary labor turnover. A special focus on how to reduce

voluntary labor turnover among successful or highly successful employees while remaining or

even increasing voluntary labor turnover among unsuccessful employees, seems valuable (Noe,

et al., 2006).

REFERENCES

Abelson, M. A., & Baysinger, B. D. 1984. In: Glebbeek, A. C., & Bax, E. H. 2004. Is high employee turnover really harmful? An empirical test using company records. Academy of Management Journal, 47(2): 277-286.

Adams, J. S. 1965. Inequity in social exchange. Advances in experimental social psychology, 2: 267-299.

Aquino, K. 1995. Relationships among pay inequity, perceptions of procedural justice, and organizational citizenship. Employee Responsibilities and Rights Journal, 8(1): 21-33.

Boxall, P., & Purcell, J. 2003. Strategy and Human Resource Management. New York:

Palgrave Macmillan.

Brockner, J. 2006. Why it’s so hard to be fair. Harvard Business Review, 84(3): 122-129.

Cascio, W. F., & Aguinis, H. 2005. Applied psychology in Human Resource Management (6

ed.). New Jersey: Pearson Prentice Hall.

Centraal Bureau voor de Statistiek. 2007. Socioeconomic trends. Statistical quarterly magazine about the labor market, social security, and income. (Sociaaleconomische trends. Statistisch kwartaalblad over arbeidsmarkt, sociale zekerheid en inkomen) (Afl.

4). Voorburg (NL): Centraal Bureau voor de Statistiek.

Compensation Roundtable. 2006. Driving performance through pay. Understanding the effect of pay design and communication on employee behavior. Washington: Corporate Executive Board.

Dalton, D. R., Krackhardt, D. M., & Porter, L. W. 1981. Functional turnover: an emperical

assessment. Journal of Applied Psychology, 66(6): 716-721.

Dansereau, F. Jr., Cashman, J., & Graen, G. 1973. Instrumentality theory and equity theory as complementary approaches in predicting the relationship of leadership and turnover among managers. Organizational Behavior and Human Performance, 10(2): 184-200.

DeConinck, J., & Bachmann, D. 2007. The impact of equity sensitivity and pay fairness on marketing manager’s job satisfaction, organizational commitment and turnover intentions.

The Marketing Management Journal, 17(2): 134-141.

DeConinck, J. B., & Stilwell, C. D. 2004. Incorporating organizational justice, role states, pay satisfaction and supervisor satisfaction in a model of turnover intentions. Journal of Business research, 57(3): 225-231.

De Vries, R. M., & Huisman, M. 2007a. Logistic regression analysis. (Logistische regressieanalyse). RUG Groningen.

De Vries, R. M., & Huisman, M. 2007b. Regression analysis: assumptions.

(Regressieanalyse: assumpties). RUG Groningen.

Dittrich, J. E., & Carrell, M. R. 1976. Dimensions of organizational fairness as predictors of job satisfaction, absence and turnover. Academy of Management Proceedings: 79-83.

Ehrenberg, R. G., & Smith, R. S. 1988. In: Gerhart, B., & Milkovich, G. T. 1992. Employee compensation: research and practice. Handbook of industrial and organizational psychology (2

ed. Vol. 3). Palo Alto (CA): Consulting Psychologists Press.

Fay, C. H., & Thompson, M. A. 2001. Contextual determinants of reward systems’ success:

an exploratory study. Human Research Management, 40(3): 213-226.

Fields, D. L. 2002. Taking the measure of work: a guide to validated scales for organizational research and diagnosis. Viewed on 2-4-2008.

http://books.google.nl/books?id=Kg8ywp20wdUC&dq=Scarpello+Jones+procedural+fair

ness&source=gbs_summary_s&cad=0

Folger, R., & Cropanzano, R. 1998. Organizational justice and human resource management. Thousand Oaks (CA): Sage Publications.

Folger, R., & Konovsky, M. A. 1989. Effects of procedural and distributive justice on reactions to pay raise decisions. Academy of Management Journal, 32(1): 115-130.

Garger, E. M. 1999. Holding on to high performers: a strategic approach to retention.

Compensation & Benefits Management, 15(4): 10-17.

George J. M., & Jones, G. R. 2002. Organizational behavior (3

ed.). New Jersey: Pearson Prentice Hall.

Gerhart, B., & Milkovich, G. T. 1992. Employee compensation: research and practice.

Handbook of industrial and organizational psychology (2

ed. Vol. 3). Palo Alto (CA):

Consulting Psychologists Press.

Glebbeek, A. C., & Bax, E. H. 2004. Is high employee turnover really harmful? An empirical test using company records. Academy of Management Journal, 47(2): 277-286.

Greenberg, J. 1986. Determinants of perceived fairness of performance evaluations. Journal of Applied Psychology, 71(2): 340-342.

Greenberg, J. 1990. Organizational justice: yesterday, today, and tomorrow. Journal of Management, 16(2): 399-432.

Griffeth, R. W., & Gaertner, S. 2001. A role for equity theory in the turnover process: an empirical test. Journal of Applied Social Psychology, 31(5):1017-1037.

Homans, G. C. 1961. In: Adams, J. S. 1965. Inequity in social exchange. Advances in experimental social psychology, 2: 267-299.

Homans, G. C. 1974. Social behavior: its elementary forms (2

ed.). New York: Harcourt,

Brace, Jovanovich.

Jones, F. F. 1998. Pay procedures and voluntary turnover: does procedural justice matter?

Psychological Reports, 83(2): 475-482.

Jones, F. F., Scarpello, V., & Bergmann, T. 1999. Pay procedures – what makes them fair?

Journal of Occupational and Organizational Psychology, 72(2): 129-145.

Lawler III, E. E. 2003. Reward practices and performance management system effectiveness.

Organizational Dynamics, 32(4): 396-404.

Leventhal, G. 1976. What should be done with equity theory? New approaches to the study of fairness in social relationships. Viewed on 26-5-2008. http://www.eric.ed.gov.proxy- ub.rug.nl/ERICDocs/data/ericdocs2sql/content_storage_01/0000019b/80/39/f2/f7.pdf

Livingstone, L. P., Roberts, J. A., & Chonko, L. B. 1995. Perceptions of internal and external equity as predictors of outside salespeoples’ job satisfaction. Journal of Personal Selling

& Sales Management, XV(2): 33-46.

Lowe, R. H., & Wittig, M. A. 1989. Comparable worth: individual, interpersonal, and structural considerations. Journal of Social Issues, 45(1): 223-246.

McBriarty, M. A. 1988. Performance appraisal: some unintended consequences. Public Personnel Management, 17(4): 421-434.

McFarlin, D. B., & Sweeney, P. D. 1992. Distributive and procedural justice as predictors of satisfaction with personal and organizational outcomes. Academy of Management Journal, 35(3): 626-637.

Moore, D. S., & McCabe, G. P. 2003. Introduction to the practice of statistics (4

ed.). New York: W. H. Freeman and Company.

Newman, J. M., & Milkovich, G. T. 1990. Procedural justice challenges in compensation:

eliminating the fairness gap. Labor Law Journal, 41(8): 575-580.

Noe, R. A., Hollenbeck, J. R., Gerhart, B., & Wright, P. M. 2006. Human Resource Management. Gaining a competitive advantage (5

ed.). New York: McGraw-Hill Irwin.

Parker, R. J., & Kohlmeyer, J. M. 2005. Organizational justice and turnover in public accounting firms: a research note. Accounting, Organizations and Society, 30(4): 357- 369.

Patchen, M. 1959. In: Adams, J. S. 1965. Inequity in social exchange. Advances in experimental social psychology, 2: 267-299.

Randall, C. S., & Mueller, C. W. 1995. Extensions of justice theory: justice evaluations and employees’ reactions in a natural setting. Social Psychology Quarterly, 58(3): 178-194.

Scarpello, V., & Jones, F. F. 1996. Why justice matters in compensation decision making.

Journal of Organizational Behavior, 17(3): 285-299.

Schaubroeck, J., May, D. R., & Brown, F. W. 1994. Procedural justice explanations and employee reactions to economic hardship: a field experiment. Journal of Applied Psychology, 79(3): 455-460.

Schneider, J. 1976. The ‘greener grass’ phenomenon: differential effects of a work context alternative on organizational participation and withdrawal intentions. Organization Behavior and Human Performance, 16(2): 308-333.

Scholl, R. W., Cooper, E. A., & McKenna, J. F. 1987. Referent selection in determining equity perceptions: differential effects on behavioral and attitudinal outcomes. Personnel Psychology, 40(1): 113-124.

Shaw, J. D., & Gupta, N. 2001. Pay Fairness and employee outcomes: exacerbation and

attenuation effects of financial need. Journal of Occupational and Organizational

Psychology, 74(3): 299-320.