Internal equity pay comparison is:
A. influenced primarily by an organization’s choice of pay level.
B. the primary administrative tool organizations use in choosing a pay level.
C. focused on what employees within the same organization but in different jobs are paid.
D. determined using market pay surveys.
E. more likely to influence the decisions of applicants to accept job offers than external equity pay comparison.
The correct answer and explanation is :
The correct answer is: C. focused on what employees within the same organization but in different jobs are paid.
Explanation:
Internal equity refers to the fairness of pay relationships within an organization. Specifically, it involves comparing compensation across different jobs or roles within the same organization to ensure that employees perceive their pay as fair in relation to the responsibilities, skills, and contributions of their roles.
For example, if a senior accountant and a marketing manager have similar levels of responsibility and expertise, but one is paid significantly more than the other without justification, it may lead to perceptions of internal inequity. This perception can affect employee motivation, job satisfaction, and even retention.
Option C captures this concept accurately, as it describes internal equity as being “focused on what employees within the same organization but in different jobs are paid.”
Let’s briefly evaluate the other options:
- A. influenced primarily by an organization’s choice of pay level: This refers more to external equity, which is concerned with how a company’s pay compares to what other organizations are paying for similar jobs.
- B. the primary administrative tool organizations use in choosing a pay level: This is incorrect; pay level decisions are usually influenced by market pay surveys and strategic goals rather than internal comparisons.
- D. determined using market pay surveys: Market surveys are tools for assessing external equity, not internal equity.
- E. more likely to influence the decisions of applicants to accept job offers than external equity pay comparison: External equity is more relevant to attracting new talent, as job seekers compare offers between companies.
In summary, internal equity ensures fairness across roles within an organization. It’s crucial for maintaining a motivated and satisfied workforce and helps to prevent conflict, reduce turnover, and foster a culture of trust and transparency.