Article

From Perceived Inequity to RESEARCH REVIEW International Journal

of Multidisciplinary | e-ISSN: 2455-3085

Retention: Leveraging Double-blind peer-reviewed and

refereed online Journal

Equity Theory in 10(4) 292-300, 2025

©The Author(s) 2025

Contemporary Workforce DOI: 10.31305/rrijm.2025.v10.n4.032

https://rrjournals.com/

Management Date of Publication: 20 April, 2025

*
Dr. Shilpa Shinde

Associate Professor, MMBGIMS

Abstract: In today’s dynamic work environment, employee retention has emerged as a critical concern for
organizations striving to maintain competitiveness, morale, and institutional knowledge. This research
examines Equity Theory, proposed by J. Stacy Adams, as a foundational framework to understand the
role of perceived fairness in shaping employee retention. The study explores how imbalances in workload
distribution, recognition, and compensation contribute to perceptions of inequity, affecting employee
motivation, engagement, and ultimately their decision to stay or leave. Drawing from psychological,
organizational, and behavioural perspectives, the paper analyses how input/output ratios, comparison
referents, and perceptions of fairness influence employee satisfaction. It delves into the implications of
equity in various organizational settings, supported by industry-specific insights from IT, healthcare, and
manufacturing sectors. Furthermore, the paper identifies practical strategies for HR managers and
organizational leaders to foster fairness through equitable job design, transparent compensation systems,
and inclusive recognition programs. The findings underscore that fairness is not merely a moral ideal but
a strategic lever for employee retention and organizational performance. The research concludes by
emphasizing the need for data-driven, culturally sensitive, and adaptive equity practices, recommending
further exploration into digital tools and evolving workforce expectations to enhance retention outcomes.

Keywords: Equity Theory, Employee Retention, Perceived Fairness, Workload Distribution, Compensation
Equity

1 | INTRODUCTION
In today's rapidly evolving and competitive business environment, employee retention has emerged as
a critical component of organizational sustainability and success. Retaining skilled, experienced, and
motivated employees not only reduces the high costs associated with recruitment and training but also
fosters continuity, organizational knowledge retention, and a stable work culture. High turnover rates,
on the other hand, disrupt team dynamics, lower morale, and hinder productivity. As organizations
strive to build resilient and agile workforces, understanding the underlying factors that influence
employee retention has become more important than ever.

*Corresponding Author 292

Dr. Shilpa Shinde, Associate Professor, MMBGIMS
Email: [email protected]

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 RESEARCH REVIEW International Journal of Multidisciplinary 10 (4)

One of the most influential theories in understanding employee motivation and behaviour in the
workplace is Equity Theory, developed by behavioural psychologist J. Stacy Adams in the 1960s. The
theory posits that employees assess fairness in the workplace by comparing the ratio of their inputs
(such as effort, experience, and performance) to the outputs they receive (such as pay, recognition, and
benefits) relative to others. When individuals perceive equity—meaning their input-output ratio is
balanced compared to peers—they are more likely to be satisfied, engaged, and committed.
Conversely, perceived inequity can lead to dissatisfaction, demotivation, reduced performance, and
ultimately, attrition.

2 | UNDERSTANDING EQUITY THEORY AND ITS MODERN RELEVANCE TO EMPLOYEE RETENTION

At its core, the theory posits that individuals assess the fairness of their work environment by evaluating
the ratio of their inputs (such as time, effort, skills, experience, and education) to the outputs (including
pay, recognition, benefits, and promotions) they receive. This input-to-output ratio is then compared to
that of referent others—colleagues, peers, or industry standards—to determine if they are being treated
equitably. A state of equity leads to satisfaction and motivation, while perceived inequity—either under-
reward or over-reward—can lead to feelings of distress, demotivation, and eventual disengagement
(Buttner & Lowe, 2017; Paré & Tremblay, 2007).

1. Rising Relevance of Perceived Fairness

Generational Shifts: Millennials and Gen Z employees, who now dominate the workforce, prioritize
fairness, purpose, recognition, and autonomy more than previous generations (Al-Twal et al., 2025;
Hassan et al., 2021). Unlike older cohorts that often valued job stability and hierarchical promotions,
younger employees actively assess whether their efforts are being acknowledged fairly and whether
their organizations reflect ethical, inclusive, and equitable values. A perceived lack of fairness in
workload distribution, pay scales, or promotional opportunities can result in swift disengagement and
higher attrition (Philip & Arrowsmith,2021).

Remote and Hybrid Work: The widespread adoption of remote and hybrid models has introduced new
complexities in managing fairness. Visibility bias, uneven access to leadership, differences in team
collaboration, and varying work environments have impacted how employees perceive equity. Those
working remotely may feel overlooked for recognition or promotion, while on-site employees might
perceive an imbalance in workloads or flexibility, leading to perceived inequity (Kock et al., 2025).

Transparency Movements: Modern employees have more access to comparative data than ever
before, thanks to salary-sharing platforms (like Glassdoor, Payscale), employee reviews, and internal
transparency initiatives. These tools empower employees to compare their input/output ratios with
others in similar roles, intensifying sensitivity to unfair treatment. Transparency has increased the
demand for justified, consistent, and data-backed compensation, recognition, and promotion policies
(Magliozzi, 2025; Malik & Singh, 2022).

2. Core Concepts of Equity Theory

Input/Output Ratios: At the heart of Equity Theory, employees assess the fairness of their work
environment by comparing what they put in (inputs) and what they receive (outputs):

• Inputs: Effort, experience, skills, loyalty, time, education, creativity, and emotional labour.
• Outputs: Salary, benefits, promotions, job security, recognition, and professional development
opportunities (Dipboye, 2018; Islam et al., 2023).

Perceived Inequity: When employees believe that their input/output ratio is not equal to that of their
peers or referent others, they experience perceived inequity. This perceived injustice can manifest as:

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• Reduced effort or productivity

• Withdrawal or disengagement
• Resentment or conflict
• Seeking alternate employment (Chou, 2012; Bharath, 2023).

Comparison Referents: Employees continuously evaluate themselves against referent others—these

may be coworkers, colleagues in similar roles at other firms, or even past versions of themselves. If a
peer with similar qualifications and efforts receives more rewards, it often triggers a negative
perception of fairness and diminishes motivation (Paré & Tremblay, 2007; Verma & Kesari, 2019).

3. Linking Fairness to Motivation, Engagement, and Retention

Perceived fairness is intricately linked with motivation, organizational engagement, and long-term
retention. Research shows that:

• Employees who believe they are treated equitably are more likely to remain loyal, motivated,
and productive (Hassan et al., 2021; Malik & Singh, 2022).
• Fair performance evaluation and reward systems lead to higher employee morale and team
cohesion (Bharath, 2023; Islam et al., 2023).
• According to a study by SHRM (2022), organizations with high perceptions of fairness saw
turnover rates 27% lower than those with fairness-related complaints.

For instance, Google uses data analytics to ensure compensation equity across gender and roles,
reinforcing fairness perceptions and supporting their high retention rates. Salesforce conducted
internal pay audits to eliminate salary discrepancies and enhance trust among its employees—leading
to stronger employer branding and reduced attrition (Magliozzi, 2025; Malik & Singh, 2022).

Modern organizations must recognize that fairness is no longer optional—it is a strategic imperative. By
embedding the principles of Equity Theory into HR practices, compensation systems, and
organizational culture, firms can create a work environment that supports psychological safety,
emotional investment, and long-term commitment from their employees (Deshmukh et al., 2023; Mer
& Srivastava, 2023).

3 | PERCEIVED FAIRNESS AND ITS IMPLICATIONS FOR EMPLOYEE RETENTION

1. Perceived Fairness and Its Effect on Retention
Perceived fairness plays a pivotal role in shaping employees' emotional and behavioural responses.
When employees perceive fairness in how they are treated—whether in task assignments, recognition,
or pay—they are more likely to stay committed to the organization.

• Fair treatment fosters trust, loyalty, and engagement.

• Conversely, perceived inequity leads to dissatisfaction, disengagement, and eventually,
voluntary turnover.

According to a PwC Workforce Survey (2023), 74% of employees who perceived their organization as
fair reported a strong intention to stay long-term, compared to only 28% who viewed their
environment as unfair.

2. Fairness in Workload Distribution and Burnout

Unequal workload distribution is a major source of stress and employee burnout, especially in high-
pressure industries. When some employees consistently shoulder more tasks than their peers without
proportional recognition or reward, it breeds resentment and emotional exhaustion.

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• Workload fairness contributes to mental well-being, productivity, and collaboration.

• Chronic imbalance can result in quiet quitting or attrition.

In a Harvard Business Review (2022) study, employees who perceived unfair workload distribution were
2.6 times more likely to report symptoms of burnout and 3.4 times more likely to seek new job
opportunities.

3. Role of Recognition Programs and Perceived Value

Recognition is not just about awards—it's about feeling seen, valued, and appreciated. Fair and timely
recognition aligns with intrinsic motivational needs and boosts morale.

• Programs that ensure equitable recognition (not biased by favouritism or hierarchy) create a
sense of inclusion and fairness.
• Recognition increases employees perceived value to the organization, directly influencing
engagement and retention.

Companies with structured recognition programs experience 31% lower voluntary turnover (SHRM,
2022).

4. Pay Transparency, Equity in Compensation, and Market Benchmarks

Compensation fairness is central to employee satisfaction. Transparency in how pay is determined—
based on skills, experience, and market standards—enhances trust.

• Pay equity means equal pay for equal work and addressing gender or demographic disparities.
• Use of market benchmarks ensures competitiveness and fairness, reducing perceptions of
favouritism or underappreciation.

A Glassdoor Economic Research (2021) report found that organizations practicing pay transparency
had 30% lower employee turnover and higher trust ratings.

5. Industry-Specific Insights
a) IT Sector
• Employees value flexibility, autonomy, and competitive pay.
• Perceived fairness in project assignments and promotions is critical.
• Burnout from long hours and rapid tech changes leads to high attrition unless managed fairly.

b) Healthcare Sector
• High emotional and physical demands necessitate equitable shift scheduling.
• Recognition for frontline efforts (e.g., during COVID-19) significantly affects morale.
• Disparities in pay between nursing and physician roles can affect perceptions of fairness.

c) Manufacturing Sector
• Skill-based pay systems and transparent evaluation metrics support fairness.
• Perceived favouritism in shift or overtime assignments is a major retention challenge.
• Recognition of blue-collar contributions is often lacking, affecting long-term loyalty.

Perceived fairness across workload, recognition, and compensation is not a luxury—it is a strategic
imperative for organizations seeking to retain talent in a competitive, multi-generational, and rapidly

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evolving work environment. Integrating equity-focused policies and fostering a culture of fairness leads
to enhanced motivation, reduced turnover, and a resilient workforce.

4 | PRACTICAL IMPLICATIONS
Understanding and applying Equity Theory in the workplace offers valuable guidance for improving
employee retention. The perception of fairness—especially in workload distribution, recognition, and
compensation—is deeply intertwined with employee motivation and organizational commitment. Both
HR managers and organizational leaders have pivotal roles to play in institutionalizing fairness.

For HR Managers:
1. Designing Equitable Job Roles:
o Ensure that job descriptions, responsibilities, and expectations are clearly defined and
consistent across similar roles.
o Conduct periodic role audits to maintain parity in workload and eliminate role creep.
o Use job evaluation systems to match responsibilities with appropriate compensation and
benefits.
2. Implementing Fair Performance Appraisal Systems:
o Develop performance appraisal systems that are transparent, evidence-based, and inclusive of
peer and self-assessments.
o Train managers to minimize unconscious bias and ensure uniform application of evaluation
criteria.
o Align rewards and promotions with measurable outcomes rather than subjective opinions.
3. Creating Transparent Compensation Structures:
o Establish pay bands and salary matrices that reflect market rates and internal equity.
o Share information about how compensation is determined to foster trust and reduce
perceptions of favouritism.
o Incorporate regular compensation reviews to adjust for inflation, performance, and market
competitiveness.

For Organizational Leaders:

1. Role Modelling Equity:
o Demonstrate fairness and integrity in decision-making, particularly in promotions, assignments,
and recognition.
o Actively participate in diversity, equity, and inclusion (DEI) initiatives to set a strong ethical tone
from the top.
o Address concerns of inequity promptly and visibly to build a culture of accountability.
2. Enhancing Communication and Feedback Loops:
o Foster an open dialogue where employees can voice concerns about perceived inequities
without fear of retaliation.
o Conduct regular surveys and focus groups to understand employee perceptions of fairness.
o Use feedback to refine HR policies and ensure they reflect the evolving needs and expectations
of the workforce.

By embedding fairness into the core of HR and leadership practices, organizations can cultivate a
culture of trust, reduce turnover, and enhance employee engagement. Equity is not just a value—it is a
strategic lever that directly influences retention and performance.

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5 | CHALLENGES AND CONSIDERATIONS

While Equity Theory offers valuable insights into improving employee retention through fairness in
workload, recognition, and compensation, its practical implementation is not without challenges.
Organizations must navigate a variety of structural, cultural, and subjective factors to apply equity
principles effectively.

1. Measuring Perceived Fairness Objectively

• Subjectivity in Perception: Fairness is inherently subjective—what seems fair to one employee
may seem unjust to another, making it difficult to standardize.
• Lack of Direct Metrics: Unlike compensation data, perceptions of fairness are often assessed
through indirect measures such as engagement surveys, exit interviews, or anecdotal feedback,
which may not fully capture the nuance.
• Real-time Assessment Gaps: Many organizations still lack mechanisms for real-time monitoring
of fairness perceptions, relying on annual surveys that may miss critical moments of discontent.

A 2022 McKinsey report showed that 44% of employees who quit cited unfair treatment at work as a
major factor—yet less than 20% of companies had continuous mechanisms to measure fairness
perceptions.

2. Addressing Biases in Recognition and Evaluation

• Unconscious Bias: Managers may unintentionally Favor certain employees based on similarity
bias, recency effect, or halo effect, affecting both recognition and performance reviews.
• Inconsistency in Recognition: When praise and rewards are not systematically aligned with
performance criteria, perceptions of favouritism emerge.
• Feedback Loops: Without timely, honest, and constructive feedback, employees may feel
undervalued or overlooked, leading to disengagement.

In the tech sector, women and minorities have reported receiving less frequent and less constructive
feedback compared to majority counterparts, impacting promotion rates and retention (Harvard
Business Review, 2021).

3. Navigating Organizational Politics and Budget Constraints

• Resource Limitations: Budget constraints often restrict salary adjustments, recognition
programs, and staffing, leading to perceived inequities—especially when workloads increase
without additional compensation or support.
• Hierarchical Imbalances: Disproportionate power dynamics can make it harder for lower-level
employees to raise fairness concerns or influence change.
• Political Influences: Internal alliances and favouritism can skew decision-making on promotions
and raises, eroding trust in the fairness of the system.

In many large public-sector organizations, rigid pay scales tied to tenure can create resentment among
high-performing newer employees, undermining morale and long-term retention.

4. Cultural and Generational Differences in Equity Expectations

• Cultural Norms: In collectivist cultures, group harmony may be prioritized over individual
recognition, while in individualist cultures, personal achievement is often expected to be
rewarded visibly.

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• Generational Gaps: Millennials and Gen Z employees often expect rapid recognition,
transparent communication, and flexible work arrangements as part of fair treatment—
expectations not always aligned with traditional organizational structures.
• Equity vs. Equality: Different employees may seek different types of fairness (e.g., equal
treatment vs. tailored rewards based on contribution), requiring nuanced strategy
development.

According to Deloitte’s 2023 Global Millennial Survey, 72% of Gen Z and Millennial employees
indicated that fair treatment and inclusive leadership are more important than salary when evaluating
long-term commitment to an organization.

Addressing fairness in the workplace requires more than structural policy changes—it demands cultural
awareness, adaptive systems, and consistent dialogue. Recognizing and addressing these challenges
proactively enables organizations to apply Equity Theory in a way that is both practical and
transformative for retention and engagement.

6 | CONCLUSION
In an era marked by rapid organizational change, diverse workforce expectations, and a heightened
demand for transparency, employee retention has become both a strategic priority and a persistent
challenge. This research has explored how Equity Theory, developed by J. Stacy Adams, serves as a
valuable lens for understanding the psychological underpinnings of employee satisfaction and
attrition.

The findings emphasize that perceived fairness in workload distribution, recognition, and
compensation plays a decisive role in shaping employees' attitudes toward their organizations. When
employees sense an imbalance between their inputs (such as effort, time, and skill) and outputs (such
as pay, praise, and promotion), disengagement and turnover tendencies tend to increase. Conversely,
when equity is perceived, it fosters trust, loyalty, and a greater commitment to organizational goals.

This research also highlights how generational shifts, remote work models, and evolving cultural
expectations have intensified the need for fairness-centric policies. Today’s employees expect not only
equitable compensation but also fair acknowledgment of their contributions and balanced work
distribution—elements that traditional retention strategies often overlook.

To effectively apply Equity Theory, organizations must go beyond surface-level fairness and embed
equity into their HR practices, performance evaluation systems, and leadership behaviours. This
includes implementing transparent compensation structures, data-driven recognition programs, and
equitable workload allocation—while also addressing unconscious bias and fostering inclusive
feedback mechanisms.

Equity is no longer just an ethical concern—it is a core driver of employee retention and organizational
performance. By integrating the principles of Equity Theory into everyday management and HR
practices, organizations can create environments where employees feel respected, motivated, and
inspired to stay. Future research should further explore sector-specific adaptations and technological
innovations that support fairness in increasingly complex and globalized workplaces.

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How Cite this article? ___________________________________________________________________________

Shinde, S. (2025). From Perceived Inequity to Retention: Leveraging Equity Theory in
Contemporary Workforce Management. RESEARCH REVIEW International Journal of
Multidisciplinary, 10(4), 292–300. https://doi.org/10.31305/rrijm.2025.v10.n4.032

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