Reasserting Internal Equity: A Multidimensional Equity Framework for Modern Pay Management

Abstract

Pay management is a critical function of Human Resource Management (HRM), with fairness as its central concern. Traditionally, internal equity has been ensured through systematic job evaluation methods such as the point system. However, contemporary organizational practice shows a shift toward market-based pay, while recent textbooks give diminishing attention to job evaluation. This paper addresses this paradox by proposing a multidimensional framework of equity consisting of primary equity, internal equity, external equity, and inputs equity. It argues that modern pay systems overemphasize external equity at the expense of other dimensions, thereby undermining fairness and consistency. The paper reasserts the importance of systematic job evaluation as a key mechanism for ensuring internal equity and advocates for an integrated approach to pay management that balances all four dimensions. The study contributes to HRM theory and practice by offering a comprehensive conceptualization of pay equity and a practical framework for evaluating compensation systems.

Key Words: Compensation, External Equity, HRM Theory, Internal Equity, Job Evaluation, Pay Management