Abstract

Compensation is of critical importance to organizations. However, seemingly arbitrary increases in employee compensation may result in operational inefficiencies. The systematic review focuses on just noticeable differences (JNDs) in pay, a rarely examined topic in the compensation literature, despite its potential to turn compensation policies and practices into strategic resources (or negative synergies). We provide a state-of-the-science review of empirical research on JNDs in pay, highlighting key concepts and empirical evidence to date. To advance the JNDs in pay literature, we integrate expectancy and equity theory with the basic tenets of the JND phenomenon. In the process, we develop an individual-level motivational framework focused on the JND threshold and the important role it plays for several relevant employee outcomes. We develop propositions to stimulate and guide empirical research to test the framework. We conclude with methodological recommendations for future research on this topic.