Justice and Culture in the Perception of Compensation Fairness

Bui K. Petersen

Abstract


While compensation is a central component in the relationship between employees and employers, it is a relatively under-researched area within human resource management and industrial-organisational psychology. Instead, where much of the compensation research has occurred is within the disciplines of economics and finance, areas where agency theory dominates. This article explores the relationship between culture and compensation practices through the lens of organisational justice theory and contrasts the role of distributive justice with the more recent procedural and interactional justice theories.
The article articulates how fairness perceptions are instrumental in determining which compensation practices fit different cultures. The consideration of individual perception is important as there is considerable variability within cultures and many organisations have to deal with increasingly multicultural workforces. A particular contribution of this paper is that it explicitly discusses justice perceptions as an explanatory variable of the relationship between culture and compensation practices, something that frequently has been omitted in prior scholarship. The article further explores the extent to which employee participation in compensation decisions may modify perceptions of fairness, and subsequently how this participation effect may be modified by culture.

Keywords


compensation, cultural values, fairness perception, organisational justice, participatory decision-making

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References


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DOI: https://doi.org/10.15678/AOC.2014.1102