The Relationship Between Pay Equity and Employee Job Satisfaction in the Banking Sector

Abstract

Pay equity, the principle that employees receive fair and commensurate remuneration relative to their contribution, qualifications, and peer comparisons, has emerged as a central concern in contemporary human resource management. The banking sector, characterised by hierarchical pay structures, performance-linked incentives, and significant gender and role-based pay differentials, presents a particularly relevant context for examining equity-satisfaction dynamics. This study investigates the relationship between perceived pay equity and employee job satisfaction among banking sector employees in Karnataka, India. Adopting a quantitative research design, structured questionnaires were administered to 280 employees across public sector, private sector, and foreign banks. Findings indicate a statistically significant positive relationship between perceived pay equity and job satisfaction (r = 0.71, p < 0.01). Regression analysis reveals that pay equity explains 50.4% of variance in job satisfaction scores (β = 0.58, p < 0.001). Public sector bank employees reported higher perceived pay equity but lower overall satisfaction compared to private sector counterparts. Distributive justice and procedural justice emerged as significant mediating variables. The study is grounded in Adams’ Equity Theory (1963) and Greenberg’s Organisational Justice Theory (1987). Findings offer practical implications for HR managers and compensation planners in the banking sector seeking to design equitable pay systems that enhance workforce satisfaction and organisational effectiveness.