Which of the following is a likely consequence of external equity perception?
A. Job rotation
B. Transfer
C. Retention
D. Promotion
E. Cooperation among employees
The correct answer and explanation is :
The correct answer is:
C. Retention
Explanation:
External equity perception refers to employees’ belief that their compensation is fair compared to what others in similar roles earn in other organizations. When employees perceive external equity, they are more likely to remain with their current employer rather than seeking better-paying opportunities elsewhere.
How External Equity Impacts Retention
- Job Satisfaction – Employees who feel they are compensated fairly in comparison to industry standards tend to be more satisfied with their jobs. This satisfaction reduces the likelihood of them looking for external job opportunities.
- Reduced Turnover – If employees perceive that they are being paid below market rates, they may seek employment elsewhere. However, if they believe their pay is competitive, they are more likely to stay, reducing turnover rates.
- Employer Reputation – Organizations that maintain external equity build a strong reputation as fair employers. This attracts and retains top talent, as employees feel valued and fairly compensated.
- Motivation and Productivity – Fair compensation helps maintain motivation and engagement. Employees who believe they are receiving competitive pay are more likely to stay committed to their work and perform better.
- Cost Savings – High turnover can be expensive due to recruitment, onboarding, and training costs. Ensuring external equity helps organizations minimize these costs by retaining employees.
Why Other Options Are Less Likely:
- Job Rotation (A) and Transfer (B) are related to internal mobility and skill development, not directly to external equity.
- Promotion (D) is based on internal career growth and performance rather than external pay comparisons.
- Cooperation among Employees (E) is more influenced by internal fairness and company culture rather than external equity.
Thus, retention is the most likely consequence of external equity perception.