Employee perspectives on individualized pay Attitudes and fairness perceptions

Abstract: The use of various types of individualized pay setting has increased dramatically in Sweden. In order for individualized pay to work as an incentive, the pay system has to be perceived as fair. This thesis focuses on the various subjective perceptions that arise in relation to individualized pay setting, since such perceptions may have consequences for employee attitudes and behavior. Using survey data from Swedish human service workers (Study I and II) as well as other public employees (Study III), the general aim was to shed more light on employees’ pay attitudes and fairness perceptions in connection with individualized pay setting. Study I examined some of the explanatory factors behind employee pay attitudes. The results showed that perceiving a clear connection between work results and pay, and perceiving a sound working climate, were both related to more positive attitudes towards the pay distribution process. Study II examined factors potentially associated with pay-related justice perceptions. The results demonstrated that perceptions of having sufficient feedback, proper information on pay criteria, gender equality, and lower workloads were connected with more favorable views of pay justice. Pay justice perceptions, in turn, appeared only to be marginally connected with employees’ work-related attitudes and behavior. Study III investigated whether women’s and men’s perceptions of the individualized pay-setting process differed. The results showed that both genders had a similar awareness of the organizational policies and goals. The women, however, reported much lower levels of pay-related gender equality than the men and perceived that men, overall, benefited more from individualized pay setting. In conclusion, employees’ perceptions of a well-functioning working climate, apparent links between work effort and pay, as well as perceived equal opportunities contribute to individualized pay systems being viewed as more fair.