Disability status, individual variable pay, and pay satisfaction: Does relational and institutional trust make a difference?

• Author: Jing Wang,Amina Malik,Amanda Shantz
• Date: 01 January 2018
• DOI: http://doi.org/10.1002/hrm.21845
• Published date: 01 January 2018

HR SCIENCE FORUM

Disability status, individual variable pay, and pay satisfaction:

Does relational and institutional trust make a difference?

Amanda Shantz

1

| Jing Wang

2

| Amina Malik

3

1

Trinity Business School, Trinity College

Dublin, Dublin, Ireland

2

School of Human Resource Management,

York University, Toronto, Ontario, Canada

3

School of Business, Trent University,

Oshawa, Ontario, Canada

Correspondence

Amanda Shantz, Reader, Greenwich Business

School, University of Greenwich, Old Royal

Naval College, 30 Park Row, London, SE10

9LS, United Kingdom.

Email: as9032w@gre.ac.uk

Although prior research suggests that disabled employees have different needs in the context

of some HRM practices, we know little about their reactions to reward systems. We address

this gap in the literature by testing a model using the 2011 British Workplace Employee Rela-

tions Survey (disabled employees, n= 1,251; nondisabled employees, n= 9,959; workplaces,

n= 1,806) and find that disabled employees report lower levels of pay satisfaction than nondis-

abled employees, and when compensated based on individual performance, the difference in

pay satisfaction is larger. We suggest that relational (derived from trust in management) and

institutional (derived from firm-wide policies and HRM practices, both intended to provide

equitable treatment to disabled employees) forms of trust play important roles. The results of

multilevel analyses show that when trust in management is high, the difference in pay satisfac-

tion under variable pay is reduced. We find just the opposite for employees who work in orga-

nizations with a formal disability policy but without supportive HRM practices; the gap in pay

satisfaction is exacerbated. However, the combination of the presence of a firm-wide policy

and HRM practices reduced the difference in pay satisfaction. Implications of the findings for

theory, future research, and management practice are discussed.

KEYWORDS

disability policy, disability status, HRM practices, individual variable pay, institutional trust,

multilevel modeling, pay satisfaction, relational trust, trust in management

1|INTRODUCTION

A priority for organizations today is attracting, engaging, and retaining

a diverse workforce (e.g., Konrad, Yang, & Maurer, 2016). This is

because increased diversity can lead to a better understanding of

local markets and customers, a greater ability to attract and retain tal-

ent, increased creativity, problem solving, and flexibility for organiza-

tions (e.g., Cox & Blake, 1991; Subeliani & Tsogas, 2005). Although

numerous scholars in HRM have examined work-related factors that

lead various demographic groups to be satisfied at work (Ariss, Vassi-

lopoulou, Özbilgin, & Game, 2013; Cooke & Xiao, 2014; Kooij, Jan-

sen, Dikkers, & De Lange, 2010), far fewer have focused on those

who are disabled or are impaired in a way that limits their activity

yet allows for gainful employment (Stone & Colella, 1996; Theodora-

kopoulos & Budhwar, 2015). Understanding factors that are associ-

ated with the satisfaction of disabled employees is important given

that disabled individuals constitute an underutilized labor pool, they

have the potential to bring about the aforementioned benefits of

diversity, and in most cases, are just as able and motivated to be suc-

cessful at work relative to their nondisabled counterparts (Ali,

Schur, & Blanck, 2011; Lengnick-Hall, Gaunt, & Kulkarni, 2008; Schur

et al., 2014).

Despite this potential, research shows that disabled employees

earn less than equally qualified, nondisabled employees (Gunderson &

Lee, 2016; Hallock, Jin, & Barrington, 2014; Longhi, Nicoletti, & Platt,

2012). The starting point of this research, therefore, is an examination

of disabled versus nondisabled employees’pay satisfaction, that is,

the “amount of overall positive or negative affect (or feelings) that

individuals have toward their pay”(Miceli & Lane, 1991, p. 246). We

expect that disabled employees have lower levels of pay satisfaction

because, according to equity theory, individuals are dissatisfied when

their work inputs (i.e., education, tenure, performance) are incommen-

surate with their work outcomes (i.e., income), compared to similar

(nondisabled) others (Adams, 1963).

DOI: 10.1002/hrm.21845

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A potential key to facilitating the pay satisfaction of disabled

employees is specific HRM practices, such as reward systems. In the

present study, we examine the attitudinal responses of disabled ver-

sus nondisabled employees to a specific type of reward practice: indi-

vidual variable pay. Disregarding disabled employees’reports of HRM

practices and their pay satisfaction may expose organizations to legal

action, given that it is illegal in most countries to discriminate against

a person because of a disability. Further, pressure is mounting for

organizations to report disability-related statistics in nonfinancial

business reports in order to comply with legal regulations and/or to

showcase socially responsible behavior (e.g., Department for Busi-

ness, Innovation and Skills, 2016; Equal Employment Opportunity

Commission, 2016; European Commission, 2014). Disabled employ-

ees who are dissatisfied are likely to leave their organizations,

thereby casting a negative light on them. Furthermore, paying atten-

tion to the unique needs of disabled employees is likely to contribute

to a diversity climate, which is positively associated with organiza-

tional commitment, identification, and retention for all employees

(e.g., Gonzalez & DeNisi, 2009). In short, organizations have a vested

interest—aside from “doing the right thing”—to ensure that disabled

employees respond positively to their pay.

An additional reason that we focus on disabled employees’attitu-

dinal reaction to individual variable pay is because there is theoretical

reason to believe that disabled employees may respond differently to

individual variable pay compared to nondisabled employees. Theory

and research on factors affecting the treatment of disabled employ-

ees posit that disabled people tend to be negatively stereotyped and

therefore may experience discrimination in performance evaluations

(Legnick-Hall et al., 2008; Smith, Webber, Graffam, & Wilson, 2004;

Stone & Colella, 1996). Consequently, disabled employees may

believe that individual variable pay systems are unfair and report

lower satisfaction with their pay.

However, there may be factors in the work environment that mit-

igate against the negative relationship between individual variable pay

and pay dissatisfaction. Identifying these factors is crucial for organi-

zations that wish to employ, engage, and retain disabled employees.

We posit that two forms of trust might make a difference. The first,

relational trust, refers to expectations that another party will act in

good faith (Rousseau, Sitkin, Burt, & Camerer, 1998; Sitkin & Roth,

1993). We develop theoretical arguments that an indication of rela-

tional trust—trust in management—may narrow the gap in pay satis-

faction between disabled and nondisabled employees under variable

pay. This is because disabled employees who trust in management

believe that the system that underpins variable pay allocation is fair.

The second form of trust is called institutional trust, and it is

based on expectations that another party will abide by formal policies

and practices that protect those in the relationship (Rousseau et al.,

1998; Sitkin & Roth, 1993). In the present study, this form of trust is

operationalized in two ways: the presence of (a) a firm-level policy

and (b) HRM practices, both of which are aimed at ensuring that disa-

bled employees are treated fairly. A distinction between policy and

practice is imperative, as a disability-related policy without supporting

HRM practices is likely to be insufficient, and may even backfire (Hill,

2009; Hoque & Noon, 2004). This is because the organizational rhet-

oric does not match the realities in practice. However, when HRM

practices are in place to support the policy, then our model predicts

that the gap in pay satisfaction under variable pay will decrease.

Figure 1 depicts our theoretical model.

This study presents a number of contributions to the literature.

We examine, for the first time, employee responses to a specific

HRM practice—individual variable pay—by disability status, thereby

addressing a call to understand diverse employees’reactions to HRM

practices (Theodorakopoulos & Budhwar, 2015). Moreover, this study

serves as a contribution because it examines the moderating roles of

two forms of trust. This advances three lines of scholarly thought.

First, the bulk of research on trust in organizational settings examines

trust solely at the micro level (Bachmann, 2011; Fuglsang & Jagd,

2015) and the underlying assumption is that “more is better.”In the

present study, we examine both the micro and macro levels, and we

present theoretical arguments that policies that aim to build institu-

tional trust may not always lead to their intended outcomes, particu-

larly in the absence of aligned HRM practices. Second, this study

advances theoretical models of disability management. Although

Stone and Colella’s (1996) theoretical framework includes formal pol-

icy as a positive predictor of the fair treatment of disabled employ-

ees, very little research has examined disabled employees’responses

to policy, or considered that policy may backfire. Finally, the (in)effec-

tiveness of formal policy is also of great interest to HRM scholarship,

as theoretical models imply that the benevolent intentions underpin-

ning some policies translate into positive outcomes (e.g., Bowen &

Ostroff, 2004; Guest, 1987), which may not always be the case. Our

research sends a particularly strong message to practitioners. We

show a way for organizations to optimize the benefits of individual

variable pay while increasing the likelihood that all employees—

regardless of disability—are satisfied with their pay.

1.1 |Disability status and pay satisfaction

Equity theory holds that when employees’inputs (i.e., education, skills,

performance) do not match their outcomes (i.e., income) in relation to

comparable others, individuals develop a sense of unfairness and

become dissatisfied (Adams, 1963). Research shows that disabled

employees earn less income relative to their nondisabled counter-

parts, even after controlling for variables such as quality of the job,

tenure, and actual performance (Gunderson & Lee, 2016; Hallock

et al., 2014; Longhi et al., 2012). Moreover, the gap in income

FIGURE 1 Theoretical model

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