The Effect Of Pay Dispersion On Employees’ Pay Fairness And Performance

Pay distribution was seriously equalitarian under the planned economic system. Small pay dispersion reduced employees’ work enthusiasm, caused employees’ sense of unfairness and leaded to low efficiency. Since China’s reform and opening-up, dominated by the market economic system, pay dispersion has been widened. However, is the widening pay dispersion reasonable? How does different employee react to different pay dispersion and will it produce different fairness perception and affect the performance? In previous studies, foreign researchers have different viewpoints on pay dispersion’s effects on performance. And only a few domestic studies have explored the relationship of pay dispersion, pay fairness and work performance, and the possible mediating or moderating mechanism of it. Given the situations, study of the effect of pay dispersion is urgent.On the basis of equity theory, tournament theory, behavior theory and the logic of pay dispersion affects employees’ pay fairness and in turn this may affect their performance, this study constructs a model of three variables (including pay dispersion, pay fairness and performance). To make a further investigate of the influence mechanism between pay dispersion and work performance, this study introduces pay fairness as a mediating variable. On the basis of literature review, pay dispersion is divided into seniority based pay dispersion and performance based pay dispersion, while work performance is divided into task performance and contextual performance. In addition, this study introduces equity preference as a moderating variable to have a further discussion of pay dispersion and pay fairness. This study conducts a survey using the maturity scales for reference with grassroots employees as the research object. Through scientific statistical analysis, the results are showed as following:(1) Seniority based pay dispersion and performance based pay dispersion are positively related to pay fairness.(2) Equity preference moderates the relationship between performance based pay dispersion and perceived pay fairness.(3)Higher pay fairness can improve both task performance and contextual performance.(4)Pay dispersion is positively related to work performance.(5)Pay fairness mediates the relationship between pay dispersion and work performance.Based on the research conclusions, the management proposals are as follows:In order to absorb talents and achieve long-term development, mangers should design the pay system and pay dispersion to match the organizational strategy and culture. In daily management, they should also pay attention to employees’ fairness perception, equity preference and the understanding of pay system and guide them, in order to maximize the incentive effect of pay dispersion, so that employees and the enterprise can achieve the performance goals. Besides, making reasonable use of performance pay, promoting healthy competition within the organization, and paying attention to both task performance and contextual performance are all to the benefit of the sustainable development goals of employees and enterprises.