HR Glossary  >   Equity Theory

Equity Theory

What is Equity Theory?

Developed by John S Adams, the equity theory at the workplace states that employees wish to maintain a fair ratio between their input (performance) and the received output (rewards and compensation) compared to the others. If there is a difference or if it is found that the employee’s inputs are greater than the outputs, it leads to their demotivation. Whereas, if the ratio is comparatively similar, the employee seems to be satisfied.

The theory is a principle that states that the fairness of how the employees are treated in the workplace guides the motivation of the employees. It is also concerned with the employees' internal and external behaviors in a workplace, and how the perceptions change the employee's behavior. Inputs given to an organization are broken down into many aspects, such as;


  • Time
  • Loyalty
  • Effort
  • Flexibility
  • Skills
  • Personal sacrifice

Outcomes for the Inputs

  • Salary increments
  • Job security
  • Employee benefits
  • Motivation
  • Career growth
  • Appreciation


Frequently Asked Questions

How does an equity theory impact your employees?

Equity theory indicates the idea of treating every individual fairly. When an employee is paid unfairly, they can feel inferior and become less productive. Meanwhile, If an employee is paid unnecessarily more, they might feel they’re superior to other employees.

Why is equity theory used?

Equity theory represents workplace equality. Every organization has its own targets and goals, treating each and every employee equally and fairly can be benefitting. To create a fair balance among the employees, providing a fair compensation, and understanding their needs; applying equity theory is quite manageable.

How equity theory is helpful?

Equity theory can be quite helpful to measure the satisfaction of the employees at the workplace. It helps keep a fair balance between the employees.

How are equity theory and organizational behavior correlated?

It is human nature to be affected by the outcome of the work. Similarly, in a workplace when the employees are treated fairly and in a balanced way they work with a lot of interest and dedication. This improves productivity of the employees which gives positive outputs for the organization.

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