Is It Pay Levels or Pay Raises That Matter to Fairness and Turnover?

Journal of Organizational Behavior J. Organiz. Behav. 26, 899–921 (2005) Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002/job.352

Is it pay levels or pay raises that matter to fairness and turnover?

AMANUEL G. TEKLEAB1*, KATHRYN M. BARTOL2 AND WEI LIU3

1 2 3

Faculty of Consumer and Organizational Studies, New York, U.S.A. Department of Management and Organization, Maryland, U.S.A. Cheung Kong Graduate School of Business, Beijing, China

Summary

Two studies examined the relationship between actual pay and distributive and procedural justice, and the extent to which these perceptions were related to two important pay satisfaction dimensions, pay level and pay raise, and ultimately, impacted turnover. For each study the measures of pay and justice variables were obtained on a cross-sectional basis, while the measure of turnover was necessarily lagged. Results showed that distributive justice mediated the relationship between pay and both pay level satisfaction and pay raise satisfaction. Furthermore, distributive justice was a stronger predictor of pay level satisfaction; whereas procedural justice was a stronger predictor of pay raise satisfaction. Procedural justice also played a moderating role in Study 2. The study also showed that only pay raise satisfaction was significantly and negatively related to turnover in Study 1, and to turnover via turnover intention in Study 2. Results support the value of considering pay satisfaction as multidimensional when evaluating justice issues in a compensation context. Copyright # 2005 John Wiley & Sons, Ltd.

Introduction

Organizations provide various forms of rewards to employees in exchange for their contribution to the goals of the organization. Of the different types of rewards availed by organizations, monetary pay is a ubiquitous and critically important factor (Bartol & Locke, 2000; Graham & Welbourne, 1999; Lawler, 1971, 1990, 2000; Milkovich & Newman, 2004). Pay can...