Employees' Responses to Merit Pay Inequity

Abstract

This study surveyed 490 faculty members from colleges and universities throughout the United States. The primary objective of the study was to determine employees' most likely responses to merit pay inequity. The findings indicate that the dominant response to merit pay inequity was quite serious, as most employees would quit their jobs and begin seeking other places to work. The employees' selection and use of various responses was also found to be moderated by age, seniority, tenure status, and salary level. In general, younger, less experienced employees without tenure were more likely to quit and were also more likely to decrease the quality of their output in response to perceived inequity. Employees were also more likely to quit and more likely to decrease the quality of their output in response to perceived inequity when their organizations had relatively lower overall salary levels. The implications of the findings are discussed, and some recommendations for compensation managers are offered.