Procedural and Distributive Justice in Compensation
Internally, equity means that employees receive compensation in relation to the knowledge, skills, and abilities (KSAs) they use in their jobs as well as their responsibilities and accomplishments. Two key issues-procedural justice and distributive justice-relate to internal equity.
Procedural justice is the perceived fairness of the process and procedures used to make decisions about employees, including their pay. Employees view procedural fairness in terms of the policies, procedure, and actions of supervisors and managers who implement the policies and procedures. As it applies to compensation, the process of determining base pay for jobs, allocating pay increases, and measuring performance all must be perceived as fair.
Another related issue that must be considered is distributive justice, which refers to the perceived fairness in the distribution of outcomes. This facet of equity examines how pay relates to performance. As one example, if a hard-working employee whose performance is outstanding receives the same across-the-board raise as an employee with attendance problems and mediocre performance, then inequity may be perceived. Likewise, if two employees have similar performance records but one receives a significantly greater pay raise, the other may perceive an inequity due to supervisory favoritism or other factors not related to the job.
To address concerns about types of justice, some organizations establish compensation appeals procedures. Many types of public-sector organizations formally identify appeals procedures that take more informal forms in private-sector firms. Typically, employees are encouraged to contact the HR department after discussing their concerns with their immediate supervisors and managers.