Total Rewards Personalization and Perceived Pay Equity

Abstract

With the increasing diversification of workforces in terms of generational differences, life phases, and values, there is a growing tendency among organizations to move away from the use of standardized compensation schemes towards a more personalized total rewards framework wherein individuals can assign value in the form of pay, benefits, well-being, recognition, and career components. Although personalization has been frequently recommended as an enabler of engagement and retention, little is known about the association between personalization and perceived pay equity, which is one of the most basic constructs in the field of Organizational Behavior and Human Resource Management (OBHRM). Using a cross-sectional survey conducted among 236 workers from technology, retail, and healthcare companies who have personalized total reward systems and supported by 15 semi-structured interviews, the research reveals that the level of personalization is significantly and positively related to pay equity perceptions (r = +0.53), where procedural justice and distributive justice emerge as the most influential proximal variables. Pay/reward transparency and manager communication become mediators for the personalization-equity relationship, whereas large referent pay difference decreases it. The study contributes to the total rewards literature with an integrative framework that ties equity theory, organizational justice theory, and self-determination theory, providing HR professionals with practical design guidelines for the personalization process.