Redesigning Rewards for Improved Fairness Perception and Loyalty

Human resource (HR) managers are deeply concerned with redesigning the process and changing the practices, to accommodate with the psychological changes happening in employee attitudes to tap committed contributions from them. Literature shows that employees reward fairness perception has a determinant role in shaping employee behaviour in addition to Reward satisfaction. This study has made an attempt to assess the impact of rewards and its contributing factors on improving employee loyalty directly and through the mediating variable of reward fairness perception, indirectly. The study adapted the Total Reward Model of ‘Worldat work’ to test the assumptions related with total rewards and employee loyalty. The data collected from the sample is analysed using structural equation modelling (SEM). The analysis revealed the explaining power and mediating effect of reward fairness perception in the relationship between total rewards and employee loyalty. The results show that enhancement of employee loyalty is possible by properly addressing employee’s reward fairness perception which is achieved through improved reward satisfaction. The results give clear indication to the HR managers about the need of redesigning the reward practice by incorporating employee reward fairness perception to optimize employee loyalty.