Jagmeet Kaur
Psychology
July 2025
Pay transparency has become a central issue in recent organizational settings, where it has impacted not only the levels of perceived fairness and trust, but also the motivating forces behind employee motivation. This paper has been conducted to determine the psychological impacts of pay transparency on employee motivation by contrasting the results in organizations that have varying levels of compensation disclosure. Taking a quantitative-dominant, cross-sectional research design with qualitative supplements, the study was based on the secondary data provided by published surveys and research on interviews with the employees in the IT, manufacturing, banking, and education industries in India. Two hundred and fifty employees were selected as a total sample, 75 of whom worked in high transparency and 75 worked in low transparency organizations. Descriptive statistics showed that although employees reported an overall understanding of the pay criteria and confidence in the processes of setting pay, the awareness of their peer salary was slightly lower. Comparative analysis revealed that high pay transparency was related to high extrinsic motivation, and a little lower intrinsic motivation, implying that a clear understanding of the external rewards can promote social comparison over internal gratification. Moreover, the correlation analysis revealed positive strong correlations of the pay transparency with the perceptions of fairness and organizational trust, moderate positive correlation with overall motivation. These facts stress the psychological sophistication of pay transparency and the necessity of organizations to critically develop compensation communication processes that would strike a balance between clarity to the outside environment and the maintenance of intrinsic employee engagement processes.
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