Perceived pay communication, justice and pay satisfaction

Purpose - Although some research shows that positive outcomes occur when workers understand how their pay is determined, little is known about the dynamics of how pay communication affects pay satisfaction. This research proposes that the relationships between pay communication and pay satisfaction exist because justice perceptions mediate them. Pay communication is of particular interest to managers of public sector organizations, where many aspects of the pay system are in the public domain, and without adequate communication, may be easily misunderstood by workers. The purpose of this paper is to discuss these issues. Design/methodology/approach - The study consists of a sample of 384 employees of a Midwestern public university in the USA who completed two questionnaires. Structural equation modeling is used. Findings - Pay communication has both direct and mediated relationships with pay satisfaction (satisfaction with pay level, benefits, pay raise, and pay administration). Distributive justice accounts for more variance in all pay satisfaction dimensions than procedural justice. Interpersonal and information justice are essentially unrelated to pay satisfaction. Research limitations/implications - The sample over-represents women, non-minorities, and workers with long-service records. Results may not be generalizeable to other organizational contexts, particularly to private sector organizations. Practical implications - Perceived pay communication predicts not only pay satisfaction, but also perceptions of organizational justice. In turn, justice's mediation is critical to enhancing satisfaction with pay. Organizations should carefully design and implement pay communication programs. Originality/value - First, the relationships between perceived pay communication and pay satisfaction are shown to be, in part, based on justice perceptions. Second, issues of pay communication have rarely been studied in US public sector organizations, which require open pay systems. Third, this paper presents improvements in measures and other methods over past research in pay communication.