Equity Theory proposes that employees derive job satisfaction based on comparing their efforts and compensation to others. It states that workers will feel equitable if their outcomes/inputs are equal to others, under-rewarded if less than others, and over-rewarded if greater than others. The theory was developed by John Adams in 1963 and suggests that inequitable employees will change their inputs, outcomes, perceptions, or choose a new comparison to restore a balanced feeling. It is criticized for oversimplifying individual variables and perceptions of fairness beyond specific inputs/outputs.

1. Equity Theory
MOHIT BHAT
PGCM5/1504

2. CONCEPT
It is the concept that people derive job satisfaction and motivation by
comparing their efforts (inputs) and income (outputs) with those of the
other people in the same or other firms.
Employees seek to maintain equity between the inputs that they bring
to a job and the outcomes that they receive from it against the
perceived inputs and outcomes of others.
First developed in 1963 by John Adams
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3. Equity theory
Equity:
A person feels equitably treated when his outcome/input ratio is equal
to other person’s outcome/input ratio.
Individual’s outcome = Other’s outcome
Individual’s input Other’s input
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Stage of Job Satisfaction

4. Equity theory
2) Under rewarded inequity / Negative inequity:
A person feels under rewarded when his outcome/input ratio is less than
whom the person compare himself.
Individual’s outcome < Other’s outcome
Individual’s input Other’s input
Equity theory states that an underpaid worker feels angry.
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5. Equity theory
3) Over rewarded inequity /Positive inequity:
A person feels over rewarded when his outcome/input ratio is greater than
whom the person compare himself.
Individual’s outcome > Other’s outcome
Individual’s input Other’s input
Equity theory states that an overpaid worker feels guilty or shame.
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6. Inputs & Outputs
Inputs:
Time, Effort, Loyalty, Hard work, Skill, Ability, Commitment,
Enthusiasm , Adaptability, etc.
Outputs:
Salary, Bonus, Recognition, Reputation, Job security, Praise,etc.
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7. Consequences:
 They change their inputs.
 They change their outcomes.
 They distort perceptions of self.
 They distort perceptions of others.
 They choose a different referent.
 They leave the field.
Based on equity theory, when employees perceive an inequity,
they can be predicted to make one of six choices.
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8. Criticisms:
 A number of demographic and psychological variables affect
people’s perception of fairness and interactions with others.
 People might perceive equity/ inequity not only in terms of
the specific inputs and outcomes of a relationship, but also in
terms of the system that determines those inputs and outputs.
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9. Thank you