Fairness in Skill-Based Pay

Abstract

The measure of Fairness in Skill-Based Pay was developed by Lee, Law, and Bobko (1998) to quantify employee perceived fairness regarding the implementation and execution of a skill-based pay program. Skill-based pay systems are defined as compensation structures that reward employees based on the range, depth, and specific types of skills they possess and apply on the job, shifting the focus from job title to competence.

This scale is rooted in the concept of procedural justice, hypothesizing that employee perceptions of fairness are critically influenced by the administration of the system. Specifically, high perceived fairness results when employees believe that certification procedures are objective and consistent across different individuals, time periods, and skill categories. Furthermore, the procedure must include transparent mechanisms, such as opportunities for employees to query decisions, and must incorporate the use of accurate and reliable information during the assessment process.

Keywords

Skill-based pay, organizational justice, compensation management, procedural fairness, employee perceptions, pay satisfaction, certification procedures, human resource management.

Authors

Lee, C., Law, K. S., Bobko, P.

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Purpose

The primary purpose of the instrument is to provide a reliable and valid assessment of the subjective evaluation of justice perceived by employees regarding the administration and outcomes of a skill-based pay (SBP) system. This measure is crucial for organizations implementing SBP plans, as perceived fairness is a key determinant of employee acceptance and the overall effectiveness of the compensation strategy.

The scale focuses specifically on the fairness of the processes used to determine raises and advancements within the SBP framework, particularly the transparency and objectivity of the skill certification procedures used by supervisory personnel.

Construct

The scale measures Perceived Fairness in Skill-Based Pay, which is fundamentally a component of organizational justice, often aligning most closely with procedural justice. The construct captures the employee’s subjective belief that the rules, procedures, and criteria governing the skill assessment and resulting compensation decisions are equitable and impartially applied.

The construct posits that fairness is multidimensional, encompassing the objectivity of the certification tests, the competence of supervisors in administering these tests, and the general fairness of the SBP plan towards the workforce.

Validity

The validity of the Fairness in Skill-Based Pay measure was established through correlational studies and rigorous statistical modeling. Perceived fairness demonstrated significant positive correlations with several important organizational outcomes and system characteristics, confirming its nomological network.

Specifically, perceived fairness correlated positively with the amount of pay at risk, overall pay satisfaction, perceived benefits derived from the skill-based pay system, the provision of adequate training and job rotation opportunities, employee understanding of the SBP plan structure, and employee understanding of the pathways for advancement within the plan (Lee et al., 1998).

Reliability

The internal consistency reliability of the fairness measure was assessed using Coefficient alpha. The resulting alpha coefficient was reported as .80 (Lee et al., 1998), which indicates strong internal consistency and suggests that the items reliably measure the same underlying construct.

Factor Analysis

A Confirmatory factor analysis (CFA) was performed to assess the discriminant validity of the fairness measure. The results indicated that the measure of fairness was empirically distinct from other related constructs within the SBP context. These distinct constructs included three primary skill-based pay system characteristics (training provision, understanding of the plan, and advancement opportunities), as well as general perceived benefits of the SBP and overall pay satisfaction.

The findings from the CFA support the conclusion that the fairness scale measures a unique and separate dimension of employee perception, distinct from employees’ understanding or the perceived economic benefits of the compensation system.

Instrument

Test Type: Self-report Questionnaire

Format: 4 items utilizing a 7-point Likert-type scale.

Language Available: English (Original study language)

Population Group: Employees/Working Adults

Age Group: Not Specified (Presumably Adult Working Population)

Population Details: Employees participating in a skill-based pay plan.

Test Methodology: Responses are obtained using a 7-point Likert-type scale where 1 = strongly disagree, 2 = disagree, 3 = slightly disagree, 4 = neither agree nor disagree, 5 = slightly agree, 6 = agree, and 7 = strongly agree. The scale score is typically derived by averaging or summing the responses to the four items.

Keywords

Organizational behavior, human resource management, compensation strategy, procedural justice, skill certification, employee attitude, psychometric scale.

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Authors

Author ORCID Identifier: Not Specified

Affiliation Email addresses: Not Specified

Correspondence Address: Not Specified

Permissions & Fee and Test Year

The scale items were published in the appendix of the original journal article. Users should seek permission from the original copyright holder, Elsevier Science (1998), for use in commercial or extensive research applications. The original publication year of the scale development is 1998.

Reference’s

Lee, C., Law, K. S., & Bobko, P. (1998). The importance of justice perceptions on pays effectiveness: A two-year study of a skill-based pay plan. Journal of Management, 25(6), 851-873. Items were taken from the appendix, page 871. © 1998, reprinted with permission of Elsevier Science.

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Items of the Fairness in Skill-Based Pay

Responses are obtained using a 7-point Likert-type scale where 1 = strongly disagree, 2 = disagree, 3 = slightly disagree, 4 = neither agree nor disagree, 5 = slightly agree, 6 = agree, and 7 = strongly agree.

1. Supervisors do a good job of certifying employees for skill-based pay raises
2. The skill-based pay certifications are a fair test of employee ability to perform a task
3. If an employee really knows how to perform the tasks that make up a skill level, the employee will be able to pass the certification tests for that skill level
4. The skill-based pay plan is fair to most employees