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One of the continuing challenges in the hotel industry is developing effective compensation policies that motivate frontline employees. Unfortunately, the areas of compensation and pay fairness are underresearched, and what research does exist often provides methodological and theoretical precision without necessarily lending itself to practical insight. The study presented here uses a longitudinal design to examine the effects of pay fairness on employees’ work effort and performance. Data for this study were collected from 270 employees and their supervisors in seven hotels in China. In practical terms, the results indicate that a fairly straightforward model connects perceptions of pay fairness with work effort and job performance. In theoretical terms, this study further validates the second-order factor structure of pay fairness dimensions (distributive, procedural, interpersonal, and informational). Stated more technically, despite the construct validity associated with a multidimensional structure of fairness, a more parsimonious model using an overall fairness representation predicts work effort and job performance better than the more detailed model that involves four distinct but interrelated fairness measurements. The chief implication is that although actual pay levels are important to perceptions of compensation fairness, hotel employees also take into account the compensation procedures, the nature of their interactions with management, and the extent to which managers and the company are forthcoming about compensation practices. Thus, money alone is not the only motivating factor for hotel employees but management treatment is also a large element of employees’ view of fairness.


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Cornell University. Reprinted with permission. All rights reserved.