The equity theory proposes that people value fair treatment and fairness motivates a similar standard of employee behavior. In evaluating fairness, employees consider the ratio of inputs to outcomes and will:

perceive a manager$$s higher salary and greater responsibilities as inequitable and demotivating

consider non$-$financial factors; for example, perceiving a lower income as equitable if it is coupled with more flexible work hours or a telecommuting arrangement

select a colleague with more experience or greater expertise as a point of reference for salary negotiation

perceive a peer$$s higher salary and greater responsibilities as inequitable and demotivating