The Relationship Between Employees' Objective Internal and External Pay Standing and Their Job Performance: A Within-Person Analysis

Researchers have paid little attention to the relationship between employees' objective internal and external pay standing and their job performance. Moreover, few studies have considered that employees' objective pay standing is dynamic; that is, it changes over time. In this study, we analyze the relationship between changes in employees' objective internal and external pay standing and their job performance. We test the hypotheses using data for players in the National Basketball Association over a period of 12 seasons (n = 4830). Decreases in employees' objective internal and external pay standing are negatively related to their task performance. Furthermore, decreases in employees' objective internal pay standing, but not in their external pay standing, are negatively related to their contextual performance. Analyzing the relationship between changes in employees' objective internal and external pay standing and their job performance adds to our understanding of the individual-level consequences of pay dispersion. This is one of the first studies to analyze the relationship between employees' objective internal and external pay standing and their job performance. Moreover, this is one of the first studies that considers that employees' objective internal and external pay standing changes, for example, because the external and internal labor markets change. The study contributes to research on employee compensation and salary, and to research on pay disparities.