The Effects of Between-Group Pay Dispersion

Although allocating resources (e.g., pay) between different job groups is a critical strategic decision, relevant research is limited. Focusing on the form of pay allocation across job groups, we consider the organizational consequences of between-group pay dispersion (BGPD). Building on the multiple social comparison literature, we propose that employees construe both large and small BGPD as fair when it is aligned with the size of explained within-group pay dispersion (WGPD). We also propose that the interaction effect of BGPD and WGPD on the distributive justice climate be extended to organizational performance via intergroup helping and employee stability (voluntary turnover rates). We present supportive evidence of the hypotheses using two multiwave studies (Study 1: 205 retail stores located in China and comprising 4,234 employees, 1,899 group leaders, and 303 senior managers, featuring objective pay data; Study 2: 123 bank branches of a large state-owned bank in China) and a supplementary qualitative study.