learning resources

Fairness in reward

Overview

Welcome to these learning resources looking specifically at the topic of fairness in reward. The resources aim to define this – and how fairness differs, although subtly, from equity, consistency and transparency – and to explore its significance to reward in organisations.

The resources are divided into two sections and the table below identifies how the learning relates to the CIPD units.

Version 1.1 – Updated April 2024.

Foundation (level 3)

This learning relates to unit 3CO04 – Essentials of people practive

LO5 – Know the important of reward in attracting, motivating and retaining individuals.

AC 5.3 – Explain the reasons for treating employees fairly in relation to pay.

Associate (level 5)

This learning relates to unit 5HR03 – Reward for performance and contribution

LO1 – Understand the impact of reward approaches and packages.

AC 1.2 – Explain how policy initiatives and practices are implemented.

Advanced (level 7)

This learning relates to unit 7HR03 – Strategic reward management

LO4 – Understand the importance of organisational approaches to compliant and ethical reward practice.

AC 4.4 – Explain the merits and impact of transparency and fairness in approaches to reward.

1. Fairness - defined

Armstrong (2007) offers the following definition of fairness in reward:

“A fair reward system is one that operates in accordance with the principles of distributive and procedural justice.”

From this it’s clear that there are two aspects to fairness, with distributive justice referring to how individuals see the distribution of reward between themselves and others and procedural justice identifying the need for fairness in how the level of reward is determined. The important point to note from this is that fairness in reward is very much about how individuals perceive the level of reward they receive, against the skills and effort deployed and how it compares to others. This makes fairness hard to manage, although efforts to ensure equity, consistency and transparency help.

Armstrong, M. (2007) A Handbook of Employee Reward Management and Practice, 2nd edn., Kogan Page, London.

2. The significance of fairness

To help build your understanding of what fairness, or more specifically unfairness, in reward looks like and it’s significance to the workplace, we need to enlist the help of two monkeys…

Activity

The video clip below uses two monkeys to demonstrate the impact of unfair reward decisions. Watch it and make a note of the following points:

  • What is it in how the monkey on the left was treated differently that made the reward unfair?
  • How did the monkey react? What was the impact on her of this perceived unfairness?
  • How might this be applied to the workplace? Are there any examples you’ve experienced or heard about?