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This is an HR COMPENSATION question. I am trying to understand the concepts of "internal equity" and how it can effect performance in the...

This is an HR COMPENSATION question. I am trying to understand the concepts of "internal equity" and how it can effect performance in the organization. I need a detailed, intelligent response on this that really explains these HR theories as it would apply in this scenario, not just an opinion. I don't understand how this is related to job performance, in detail.


Assume a given job "Job X." According to the organization's job evaluation, pay structure and internal equity, employees starting out on that job should be paid $20 an hour including benefits. 


Your competitors are paying employees starting out on that job at $30 per hour including benefits. If you pay employees doing that job $30 per hour, it will throw internal equity out of whack because employees doing that job will be making more money than employees doing jobs that are worth more. 


If you pay employees doing that job $20 per hour, you will be paying less than your competitors are paying the same employees. 


Why would this happen and how would an HR Mgr correctly approach it.

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