HR Glossary  >   Equity Theory

Equity Theory

An employee is more likely to remain motivated and find satisfaction in their role if they believe they are being fairly compensated for their efforts. The equity theory is an idea that you can apply to keep your team motivated. This theory is developed by J. Adams, a renowned psychologist.

Managers need to recognise that workers will draw situational comparisons between themselves and their colleagues, according to Adams's Theory. An employee's motivation may be greatly impacted if they discover an unfairness during this comparison. Therefore, managers must comprehend that, even if they don't treat every employee equally, they still need to treat them fairly.

Equity theory proposes that people strive for impartiality in their relationships. They want to believe that other people are giving them what they deserve. People may become unhappy and even take action to make things right if they believe they are not being treated fairly.

To improve worker productivity, workplace effectiveness, and professional career development, motivation may be crucial. According to the theory of motivation, workers are more likely to be motivated and satisfied with their jobs when they believe they are being paid fairly. Understanding this theory and putting its principles into practice will help you stay inspired and productive. In this article, you will learn about equity theory in detail.

Meaning and Definition

According to the equity theory of motivation, an individual's motivation is directly impacted by the compensation they receive for their labour. When it comes to the job, it means that a person will typically try to strike a balance between what they offer the company and what they receive in return.

When it comes to enriching motivation and providing value to the contributors, it makes sense to understand theory in the work context if you want your team to work as a productive unit. Your team may always be recharged in their spirits if you properly remunerate them for tasks that they have completed. Perhaps this would contribute to improvement in communication, group work, and the spirit of work.

An organisation can perform more effectively and efficiently when this theory concept is efficiently executed, and the employees appreciate the relevance and consequences of their work. All employees have the same opportunity to be successful when there is equity. Employers and employees will benefit through participation and the rise of a positive work environment which leads to fair competition in the enterprise. Under normal operating procedures, workers who feel that their position at an equivalent compensation level to others will decrease or quit their jobs altogether.

Elements of the theory of equity in motivation

The inputs and outcomes are the two main parts of this theory. The way a team member views these two elements may have an impact on how motivated they are.


An input is something that someone does to be compensated. Time commitments, regular work responsibilities, allegiance to an organisation, and a passion for one's work are examples of various inputs. Employees frequently make a distinction between inputs they believe to be under their control and those that are not. Seniority and job training are examples of uncontrollable inputs, whereas communication and attendance are examples of controllable inputs.


The benefits that employees receive in exchange for their labour and efforts are known as outputs, and they include retirement benefits, bonuses, health insurance, and salary or wages. Salary increases, job security, and perks like paid time off are possible additional factors. Reputation and admiration are examples of additional intangible outputs. According to the theory, depending on the policies and incentive structures of the organisation, the value of the output is a direct result of the input. Creating a work-life balance for all the employees.

Moderating Factors

A person's opinion of fairness may also be influenced by moderating factors like life experience and educational attainment. Employees with greater education and experience, for example, might have interacted with more colleagues in their field, which raises the possibility that they will make comparisons to people employed by other companies. In a similar vein, individuals with longer tenure in their organisation might search within for benchmarks, whereas those with less experience might turn to outside resources.

Referent Groups

Referents are the methods by which workers compare and evaluate the output they receive to evaluate and form an opinion. Four primary referents are identified, namely

  • Self-inside: This takes into account the worker's prior experience from a different position within the same organisation.
  • Self-outside: This examines the worker's prior employment history outside of their current employer.
  • Other-inside: This refers to the contributions and outcomes of one worker who works for the same company as another worker.
  • Other-outside: This contrasts present workers with those who hold comparable positions at other businesses.

How does Equity Theory Work?

The foundation of this theory is the notion that individuals work hard to keep relationships balanced. They want to believe that the people they engage with are treating them fairly. People will compare what they give to a relationship and what they get in return, according to equity theory. They will act to balance the scales if they believe they are not receiving what is fair.

Numerous behaviours, such as job satisfaction, employee motivation, and organisational citizenship behaviour, can be explained by this theory. Workers who believe they are not receiving fair treatment may grow resentful and lose motivation. Additionally, they might be less inclined to go above and beyond the call of duty. Organisations can increase employee motivation and satisfaction by applying this theory to comprehend and resolve employee concerns.

Benefits of Equity Theory

Decreases the Possibility of Exploitation

The theory of motivation's main advantage is that it works to stop employee exploitation. It is unfair to the five who are paid less if ten employees in a company perform the same tasks, and five of them are paid more than the others. Companies cannot pay different salaries to employees who perform the same work in the same conditions if they apply this theory of motivation.

Encourages and Empowers Workers

When workers perceive that everyone in the organisation or team is being treated fairly and equally, they are more likely to become motivated. This is a result of their realisation that they may be eligible for rewards if they produce extraordinary results helping in employee engagement. Thus, putting this theory to use can inspire workers and motivate them to increase their output.

Strengthens Connections Between Employees

When the theory is put into practice, employees can compete healthily while still being assured of the fairness of the product, which can lead to better working relationships. Employees might not feel unfairly targeted or threatened in such a setting. By lowering conflict, this theory can contribute to the development of a more welcoming and inclusive work environment.

Motivates all the Employees

When it comes to social psychology, the main premise of this theory is that people will strive to have equality within their intergroup relations. The subject matter that may cause people to act differently often reduces to greater or lesser wages than the one. An employee feels satisfaction when he or she tries to make up for the injustice by seeking appropriate remuneration for the job or changing his or her actions to match the results, which increases employee satisfaction and, therefore, productivity.

Supports Organisational Justice

The theory related to organisational justice, which is a strong supporter of equity, suggests that people from a somewhat equitable organisation experience less strain. Organisations create an environment that acknowledges workers and considers them stakeholders in the socioeconomic structure of the organisation by tackling equity issues. It contributes to their welfare as employees, reduces conflicts in the organisation, and moulds them into the right culture in the company.

Enhances Performance

People are more likely to be content with their work and driven to give their best effort when they believe that their relationships have equity and fairness. This results in higher productivity, better performance on both an individual and team level, and eventually organisational success.

Disadvantages of Equity Theory

Disregard Variations in Perception

The equity theory's failure to take into consideration the disparity in perceptions between the employees and management of the company is a significant drawback. While other employees may be more productive and receive higher compensation. As a result, an employee may feel that they are working in the same capacity as their teammates but are unfairly receiving less money.

Fails to Foresee the Behaviour of Employees

The various forms of incentives and their influence on employee behaviour are not taken into consideration by this theory. This is because, while a company that successfully applies the equity theory should ideally see very low attrition rates, this may not always be the case. Even if a company provides equal pay and benefits to all of its workers, an employee may still choose to leave if a rival offers them a better wage.

Distorts the Comparison's Scope

Individuals in the workplace frequently assess their value concerning their peers, which leads them to anticipate salary and position parity. Despite performing similar tasks, each person is different and may bring a different value to the team or organisation. Since the theory sees all employees as having interchangeable traits and the same values and contributions, it is unable to take into account these differences and unique characteristics.

Restricted Scope in Non-Work Relationships

Although the theory is mainly used in work-related relationships, fairness dynamics in non-work relationships might not be fully captured by it. A variety of variables and interactions could be present when assessing fairness in interpersonal, platonic, or communal contexts.

Limited Attention to Individual Needs

The theory largely ignores the particular needs and preferences of individuals in favour of emphasising the balance between inputs and outcomes. It assumes that everyone aspires to equity while ignoring the possibility that some people would place a higher value on other aspects of their lives, such as work-life balance, personal development, or job satisfaction, than on rigorous equity considerations.

Subjectivity in Assessing Inputs and Outcomes

The theory assumes that people are fully aware of both their own and other people's inputs and outcomes. Subjective interpretations and prejudices, however, may skew these assessments. It can be difficult to determine a common measure of equity because different people may have different ideas about what makes an equitable input or result.

Tips to Implement Equity Theory in an Organisation

You can better understand the various elements that affect your team's motivation levels by using the theory. Take into account the following advice if you wish to implement the equity theory at work

Ensure that Team Members are Fairly Balanced

Establishing standards for equality and fairness will help your team as a whole because many workers base their contributions on what they anticipate receiving. Ensure that each team member is paid equally for the same amount of work performed. To make sure that everyone feels appreciated for their work, you can also schedule frequent team meetings.

Provide a Competitive Salary

If workers perceive that their pay is commensurate with other professionals in the industry who have comparable skills and experience, they are more likely to be content with their work. Analyse the industry average salary data and select suitable incentives that are typical in your field. You can demonstrate your belief in an employee's ability and reassure them of their parity with professionals in other companies by providing them with competitive compensation that aligns with industry standards.

Ensure that the Compensation you Offer is Commensurate

Different comparisons may be drawn between the workplace and non-work environments by your team members. An employee is more likely to remain content in their role if they perceive that they are achieving comparable results to those of others in their field with comparable experience. When establishing pay guidelines, take into account gathering data on external roles' salaries, perks, and incentives. To help employees feel more at ease in their roles, try to use similar items.

Know your Employee's Term for Success

Employees within a team may have varying preferences for incentives and rewards. While some may value experience and training more, others may feel they should receive better benefits or higher pay for their time and effort. By identifying the rewards employees want, you can motivate them and provide them with the right kind of recognition. You can also easily implement the theory by offering more flexibility and customisation options in your rewards strategy.

Sustain a Balanced Allocation of Authority Among Team Members

Since many members of the team put in a lot of effort with the hope of being rewarded, setting standards for justice and equality can benefit the whole group. In addition to paying everyone the same wage and benefits for doing the same amount of work, make sure that performance management and communication are transparent. Provide safeguards to guarantee the impartiality of the evaluation procedure.

Recognise the Values of Your Team

Different team members will likely value different inputs and results differently. While some people believe that education, training, and skills are more important than time and effort, others might disagree. You can maintain your team's motivation and happiness at work by demonstrating to them that you genuinely value their contributions. It could be beneficial to find out what drives each member to create a workable plan.

Continue to Reinforce the Compliments that you Receive

Integrate acknowledgement and recognition into the communication policies of the organisation. Teach managers to recognise and thank team members for their accomplishments. Establish a welcoming, honest, and upbeat work atmosphere that emphasises the significance of employees to the success of the business.


Managers may use motivational theories to know what has to be rewarded to their staff members and create a helpful reward system. In today's globalised working environment, every motivational theory has its share of erudite implications that many managers will do well to ponder. Managers, however, have to deal with staff that need to have their satisfaction maximised as well as be motivated to work while also attempting to adjust to the new cultural demands that have emerged because of globalisation.

Consequently, managers should develop working conditions that increase efficiency and employee satisfaction, namely by changing the organisation's setting. To overcome this challenge, it is important to understand the factors that affect the individual progress of the company's workforce and create a flexible compensation scheme.


What justifies the application of equity theory?

Because theory is seen as a motivator, it is applied. Its foundation is the notion that people desire equitable treatment in their interpersonal relationships. People may become irate and less motivated if they believe they are not receiving fair treatment. By making sure that everyone is treated fairly, the theory seeks to address these sentiments.

What does equity theory entail?

According to the theory of motivation known as equity theory, employees' motivation at work is primarily influenced by their perception of justice. Workers mentally record all of the inputs and outputs associated with their work, which they then utilise to compare their input-to-output ratio to that of other workers.

The equity theory was founded by who?

John Stacey Adams first presented equity theory in 1963 (Adams, 1963) to use it in an organisational setting. The theory was created in response to the dearth of theoretical justification for the psychological underpinnings of the perception of inequality (Adams, 1963).

What is the equity principle of management?

The equity principle highlights the respect and considerate behaviours of supervisors towards their subordinate workers. This will ultimately ensure the citizens’ unwavering loyalty and devotion. Although the fall may not always be the case, the rule of might is right is inevitable.

Why is equity theory important?

This theory aims to explain and clarify the significance of the perception with workplace fairness, equality and rightness. This is of utmost importance because it has to do with organisations’ functioning.

Who applies equity theory?

This theory algorithm is used to interpret the natural justice between people's relationships. The responsibility of power could be looked at, particularly from the perspective of an individual’s assessment of what is fair in their lives and their relationships. This theory finds many applications in the workplace as an employee would consider the inputs that they have made, say, their time, effort, or skills, and weigh them against the input they have received—a salary, perks, or recognition, for instance. People may regard with disinclination participation and, possibly, getting off a relationship if they see that they are facing mistreatment.

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