Employee perceptions of pay equity and compensation factors: a study of Vietnamese state-owned enterprises

The transformation of state-owned enterprises (SOEs) has been a central point of Vietnam’s economic reforms commencing in the late 1980s. This transformation has led to significant changes in compensation policy and practices. The perception of pay equity among SOE employees has also shifted from a view of respecting harmony and collectivism towards greater individualism and performance based pay. This study investigates the relationships between compensation and employee perceptions of pay equity. We present a theoretical framework based on Compensation Theory and Equity Theory and employ a quantitative approach. The results confirm positive relationships between four main compensation components of: minimum wage, salary, benefits and relational returns, with perceptions of pay equity. The findings are significant and contribute to a theoretical understanding in the context of an Asian economy moving from a collectivist to a more individualist focus. They also provide guidance for practitioners to enable them to develop compensation policies and practices that improve employee perceptions of pay equity which in turn can boost efficiency and effectiveness.