Salary Equity, Employees’ Behavior And Operating Performance

Reasonable distribution of income is the important embodiment of social justice, and the company’s remuneration distribution as the initial distribution of the society, is one of the factors to increase the gap in China and the social stability. Sky-high compensation of executives and the high job-hopping behavior of the lower income employees can not only increase the noise of the social public opinion, but also affect the company’s long-term development. As a result of the executives and ordinary employees’ inequality status, company’s salary distribution system is largely influenced by management power, and ordinary employees cannot be compensation policy makers. As the basic level workers of the company, employees play a key role in the company’s business performance. However, companies operating performance is the common effort of employees and executives, if the company cannot effectively motivate its employees, the company’s operating performance targets will be difficult to achieve. Salary distribution system can not only affect employees’psychological feelings, and also affect the employees’ behavior. Fairness and satisfaction can improve employees’ work efficiency and reduce the occurrence of employees’turnover behavior. Salary is the most important factors focusing on employees, and the fair salary distribution system is one of the important factors that affect employees’behavior. From the individual level, fair distribution of compensation can not only improve employees’ positive feeling, and can improve employees’ work efficiency and appropriate. For the company level, unfair distribution pay can increase the company’s labor costs, and reduce the working efficiency and operating performance. While unfair compensation settings will have larger negative impact on employees’ psychological and behavior.Recent years, the rapid economic growth of China maintains a huge demand for labor. In the case of labor demand continues to expand, laborers have more employment opportunities. When employees are not satisfied with the company compensation system, they will not only reduce the work efficiency for the company’s discontent, but also choose to leave the company. The low efficiency of the existing staff performance, the cost caused by vacancies, and the cost of new staffs’low efficiency, these indirect costs will reduce the company’s operating performance. In some extent, the loss of important positions can even restrict the development of the company. To improve performance, executives should make proper incentives for the employees.With the deepening reform of SOEs, business performance has becoming an important assessment index of state-owned company’s executive. And the executive’s pay of SOEs is increasing with the increase of the company’s operating performance. At the same time, our country began to issue executive pay limit and the corresponding specific provision. Compared to SOEs, non-SOEs’restrictions on executive pay is less. And with relatively more complete market competition mechanism, non-SOEs’employees face stronger fairness. However, additional political purpose may make executives to take more social responsibilities and to hire more employees. This can not only reduce the company’s human resources allocation efficiency, but also cover the real behavior of the staff.Behavior theory emphasizes the average distribution, including the result fairness, procedural fairness and interaction fairness. Result fairness distribution again can be divided into:personal fairness, internal fairness and external fairness. The cognitive process of salary distribution by employees has a significant impact on employees’behavior. Interactive fairness emphasizes the interaction between employees and executives. This paper selects the employees’wage, internal pay gap and wage premium to measure individual, internal and external fairness. As for the variables of the process fairness, this paper choose the proportions of the increasement of executive pay to the increasement of employees pay with different firm performance to measure the salary allocation procedure fairness and interaction fairness. Due to the establishment of salary distribution based on the company’s operating performance to some extent, this paper selects compensation change with the change of the company’s performance as an intermediate variable to measure the process of salary allocation fairness. When the executive pay rate increases significantly higher than the employees’, employees will have stronger sense of unfair, especially when the company’s performance is declining. The negative behavior of employees when facing unfairness will also have a negative impact on company’s performance. So this paper adopts empirical analysis method to test the employees’ impact on the company’s operating performance.This paper found that unfair payment can reduce the employees’work efficiency, and increased the probability of employees’ turnover in both SOEs and non-SOEs. But the salary distribution process fairness has less effect on the employees’behavior. While compared with the SOEs, the process fairness has more significant impact on employees’behavior on non-SOEs.The results also found that staff redundancy significantly reduced salary allocation result fairness and the sensitivity of the employees’behavior, and more significantly in SOEs. The lower working efficiency and higher turnover will significantly reduce the company’s operating performance. At the same time, the study found that:in non-SOEs, keeping some redundant employees can improve operating performance during the current and in the future, but in SOEs it will reduce the company’s operating performance.In this paper, the six chapters’ concrete writing chapters are arranged as follows:The first mainly introduces the research background and significance based on the theory of fair compensation, and expounds the research ideas and research framework of this paper.The second chapter formed the theory research by analyzing the theory of executive power, and the theory of employee behavior through the equity theory, the optimal compensation contract theory. Equity theory includes the result fairness, procedural fairness and interaction fairness. Existing papers study the distribution of compensation and compensation gap is fair or not through employees’compensation satisfaction, but direct research papers few has studied salary allocation fairness theory. In addition, different nature of companies has different constraints on characteristics and compensation. This research laid the foundation and background of the distribution fairness consequences by the different nature of company.The third chapter summarized the research status of equity theory and economic consequences at home and abroad. Through the current research paper of salary equity theory and economic consequences, this part theoretically deduced the equity theory’s influence on employees’behavior and the influence of employees’behavior on operating performance.The fourth chapter:the research hypothesis. Through the analysis of relevant theories, this paper puts forward four research hypotheses. Hypothesis1:the fairer the salary allocation result, the higher the employees’work efficiency and the lower the probability of employees’turnover; Hypothesis2:the fairer the salary distribution process, the higher the employees’work efficiency and the lower the probability of employees’turnover; Hypothesis3:redundant employees will reduce the sensitivity of the fairness of salary distribution and the employee behavior; Hypothesis4:employees reducing productivity and leaving the company can reduce operating performance; and high redundancy will reduce operating performance.The fifth chapter:the economic consequences of a salary allocation fairness test. This article first analyzes the compensation distribution results impact on employees’productivity and employees’turnover behavior from angle of the employees’wage, gap and premium, then analyzes the changes in performance of salary allocation process fairness’impact on employees’ productivity and turnover. As the different nature of the company, the equity theory’s influence on employees’ behavior mechanism also differs from each other. This article also tests different property companies’inspection pay distribution fairness theory’s influence on employees’behavior. Second, this paper testes the redundancy on remuneration allocation fairness and sensitivity of voluntary behavior from the perspective of staff passive behavior. Finally, this paper adopts the method of empirical study, and examines respectively employees’productivity and employees’turnover impact on operating performance.Chapter6:research conclusion and revelation.This paper provides empirical evidence from the microscopic angle of the consequence of salary equity theory study, and also analyzes the link between the employees’behavior and operating performance. To understand the behavioral responses of employees by salary distribution and the influence of the reaction on operating performance, this paper provides empirical evidence.This paper’s possible contribution is:the first to use the micro data of China’s listed companies to study the distribution of compensation fairness and procedure fairness’ influence on employees’behavior, and further test the employees’ impact on operating performance. In terms of indicators, this paper established the concrete index system to measure the result of pay fairness and procedure fairness, the employee wage, GAP and premium to measure the result fair variables, and selected the executives’pay and employees’ wage with the fluctuations of the company’s performance indicators to measure process fair variables. This paper also divided the behavior into active and passive behavior, that is, the employees’ work efficiency, employees’ turnover behavior as the active behavior, and redundancy as the passive behavior. Finally, this study also uses empirical research method to check the employees’ impact on operating performance. This study empirically based on large sample, provides an objective and scientific empirical evidence for the economic consequences of fair theory research.