Perceived pay communication, justice and pay satisfaction
| DOI | https://doi.org/10.1108/01425451111153862 |
| Published date | 16 August 2011 |
| Pages | 476-497 |
| Date | 16 August 2011 |
| Author | Nancy E. Day |
| Subject Matter | HR & organizational behaviour |
Perceived pay communication,
justice and pay satisfaction
Nancy E. Day
HW Bloch School of Management,
University of Missouri – Kansas City, Kansas City, Missouri, USA
Abstract
Purpose – Although some research shows that positive outcomes occur when workers understand
how their pay is determined, little is known about the dynamics of how pay communication affects pay
satisfaction. This research proposes that the relationships between pay communication and pay
satisfaction exist because justice perceptions mediate them. Pay communication is of particular
interest to managers of public sector organizations, where many aspects of the pay system are in the
public domain, and without adequate communication, may be easily misunderstood by workers.
The purpose of this paper is to discuss these issues.
Design/methodology/approach – The study consists of a sample of 384 employees of a Midwestern
public university in the USA who completed two questionnaires. Structural equation modeling is used.
Findings – Pay communication has both direct and mediated relationships with pay satisfaction
(satisfaction with pay level, benefits, pay raise, and pay administration). Distributive justice accounts
for more variance in all pay satisfaction dimensions than procedural justice. Interpersonal and
information justice are essentially unrelated to pay satisfaction.
Research limitations/implications – The sample over-represents women, non-minorities, and
workers with long-service records. Results may not be generalizeable to other organizational contexts,
particularly to private sector organizations.
Practical implications – Perceived pay communication predicts not only pay satisfaction, but also
perceptions of organizational justice. In turn, justice’s mediation is critical to enhancing satisfaction
with pay. Organizations should carefully design and implement pay communication programs.
Originality/value – First, the relationships between perceived pay communication and
pay satisfaction are shown to be, in part, based on justice perceptions. Second, issues of pay
communication have rarely been studied in US public sector organizations, which require open pay
systems. Third, this paper presents improvements in measures and other methods over past research
in pay communication.
Keywords Pay communication,Organizational justice, Pay satisfaction, Universities,
United States of America
Paper type Research paper
Introduction
Although pay is the major reward component in nearly all organizations (Scott et al.,
2005), few firms spend much time and effort communicating to their employees about
how pay is determined and allocated (Balkin and Gomez-Mejia, 1985; Lawler, 2003;
Scott et al., 2005). Indeed, surveys show that many employees are dissatisfied about how
well they understand their pay (Rogers et al., 2003). Since pay is often seen as
confirmation of one’s status in and value to the organization, the emotional and
behavioral impact of misunderstanding compensation systems can be great ( Jones et al.,
1999; Rogers et al., 2003). Further, evidence exists that communication about
management practices can increase organizational commitment, job satisfaction,
performance, pay satisfaction and perceptions of pay fairness, and encourage a positive
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0142-5455.htm
ER
33,5
476
Received 30 July 2009
Revised 23 December 2010
Accepted 5 January 2011
Employee Relations
Vol. 33 No. 5, 2011
pp. 476-497
qEmerald Group Publishing Limited
0142-5455
DOI 10.1108/01425451111153862
psychological job contract (Brown and Huber, 1992; Cappelli and Sherer, 1988;
Dreher et al., 1988; Dyer and Theriault, 1976; Goris et al., 2002; Heneman and Judge, 2000;
Lawler, 1981; Mulvey et al., 2002; Putti et al., 1990; Vakola and Bouradas, 2005;
Wimalasiri, 1995; Winter and Jackson, 2006). Ensuring that employees are satisfied with
their remuneration is critical: pay dissatisfaction has been shown to influence cognitions
and behaviors, including performance, commitment, trust, theft, job search, union
sentiments, benefit choice, turnover, intention to quit, organizational effectiveness
and tardiness (Currall et al., 2005; Heneman and Judge, 2000; Kisilevitz et al., 2006;
Tekleab et al., 2005; Williams et al., 2006).
This study investigates how employees’ perceptions about pay communication affect
critical attitudes like justice perceptions and pay satisfaction in a US public sector
organization. This is an important research topic, particularly for these organizations,
which have open pay systems. Indeed, past public sector research shows that pay system
elements are experienced more favorably when employees trust their organizations
(Condrey, 1995). Unfortunately, research suggests that workers in public sector
organizations seem to experience long-term management mistrust (Page et al., 2007).
Contributions of the paper
This study extends existing research on pay communication in several ways. First,
it attempts to explain the relationship between pay communication and pay satisfaction
by incorporating justice perceptions as mediators (Colquitt et al., 2001; Greenberg, 1990).
Second, unlike past research that has relied on one-dimensional measures of pay
satisfaction, it utilizes a well-respected multiple-dimension measure (Heneman and
Schwab, 1985; Heneman and Judge, 2000; Judge, 1993; Judge and Welbourne, 1994;
Tekleab et al., 2005), introduces a multi-item measure of pay communication, and applies
structural equati on modeling (SEM). T hird, it researches f our dimensions of
organizational justice (two of which, interpersonal and informational, have not been
studied much to date), and four dimensions of pay satisfaction.
Fourth, it investigates these dynamics in an open pay system – a US public sector
organization. These organizations are required by law to make workers’ pay levels
accessible to members of the public, as well as to employees. (Only a very few US
private sector organizations are experimenting with these “open systems”; Colella et al.,
2007.) In these systems, it is relatively easy for employees to find out what coworkers,
supervisors, and subordinates make by running an internet search or taking a trip to
the library. Without proper communication, this openness may lead to destructive
comparisons, misunderstandings, distrust, or resentment among employees. Without
understanding how pay is determined, knowledge of others’ pay may threaten pay
satisfaction and compromise pay’s motivational function. Just knowing the level of
coworkers’ salaries does not explain why some may justifiably earn more or less than
others. Key data such as coworkers’ performance appraisal history, level of skills and
education, extent of their experience, and disciplinary issues, are unknown. With out
knowing the basis of pay determination, employees may make assumptions that
inequitable pay practices exist in the organization.
It is not the purpose of this paper to compare an open system with other,
more “closed” pay systems; however, the potential for significant fairness issues in
open pay system of the public sector is great, thus providing an interesting research
context. While fairness perceptions are also important in organizations that have
Perceived pay
communication
477
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