From Perceived Inequity to Retention: Leveraging Equity Theory in Contemporary Workforce Management

Abstract

In today’s dynamic work environment, employee retention has emerged as a critical concern for organizations striving to maintain competitiveness, morale, and institutional knowledge. This research examines Equity Theory, proposed by J. Stacy Adams, as a foundational framework to understand the role of perceived fairness in shaping employee retention. The study explores how imbalances in workload distribution, recognition, and compensation contribute to perceptions of inequity, affecting employee motivation, engagement, and ultimately their decision to stay or leave. Drawing from psychological, organizational, and behavioural perspectives, the paper analyses how input/output ratios, comparison referents, and perceptions of fairness influence employee satisfaction. It delves into the implications of equity in various organizational settings, supported by industry-specific insights from IT, healthcare, and manufacturing sectors. Furthermore, the paper identifies practical strategies for HR managers and organizational leaders to foster fairness through equitable job design, transparent compensation systems, and inclusive recognition programs. The findings underscore that fairness is not merely a moral ideal but a strategic lever for employee retention and organizational performance. The research concludes by emphasizing the need for data-driven, culturally sensitive, and adaptive equity practices, recommending further exploration into digital tools and evolving workforce expectations to enhance retention outcomes.