One situation I’ve heard about where compensation was a key factor involved my coworker finding out they were being paid significantly less than a coworker in the same role with similar responsibilities. According to Week 8 Lecture 1, this is an example of individual equity where employees look at individual equity and see a negative ratio where their coworker’s input/output is greater than theirs. This realization led them to be more distant from their work, and they eventually started looking for a new job.

Compensation is seen as how much you are valued at the company. If you are being paid less compared to your coworker, you could feel like the company considers them to be better or more important. Pay is “an emotional measure reflecting the extent to which an employee feels their employer values them” (Smith, 2015, p. 1). I know in some company cultures, it’s looked down upon to talk about compensation, and there’s not a lot of pay transparency. They are worried some people could put in less effort or leave if they find out their pay was not on par with others in the same role, which did happen in the situation I mentioned.

In this case, one reason I think my coworker left the company is that they did not have pay transparency. They didn’t sit down with employees and explain why they were being paid the amount they were. If the company had regular conversations about compensation (explaining pay decisions and performance metrics), my coworker might have felt more valued and less blindsided. Openness and transparent communication can build trust and retention in the long term.

Smith, D. (2015). Most People Have No Idea Whether They’re Paid Fairly. In Harvard Business Review (pp. 1-4). Harvard Business Review.