Concept of equity in direct financial compensation
Answers
Kathy owns a custom furniture company. Her company makes custom furniture by hand and sells it through the Internet and a small company-owned retail store. She employs a broad range of employees, from artisans to salespeople to office staff. Her company is going through a growth spurt, and she has recently increased her labor force by about a third. In bringing new employees into the company, Kathy needs to be mindful of pay equity.
Equity is a sense of fundamental fairness. In the context of compensation, financial equity, or compensation equity, is the perception by employees that they are being paid fairly. The perception of being overpaid or underpaid can create a sense of inequity in the workplace - a sense of unfairness. Compensation equity has an external component and an internal component. Let's take a look.