This study draws on Equity Theory and Social Exchange Theory as complementary interpretive lenses for understanding how pay inequality is experienced and influences employee retention. Rather than being used to test causal relationships, these theories provide a conceptual foundation for interpreting employees’ and managers’ accounts of fairness, value and reciprocity within the employment relationship.

Equity Theory offers a valuable framework for understanding how employees make sense of pay inequality (Adams 1965). Initially developed by John Stacey Adams in the early 1960s, the theory proposes that workplace motivation is shaped by individuals’ perceptions of the balance between what they contribute to their work and what they receive in return, with social comparison groups playing a central role in fairness judgements (Adams 1963, 1965). Employees evaluate fairness by comparing their inputs, such as effort, skills, experience and responsibility, with their outcomes, including pay and recognition (Adams 1965; Greenberg 1987). These evaluations are inherently comparative, as individuals assess their own outcomes relative to those of colleagues performing similar roles (Colquitt 2001; Cropanzano, Stein & Goldman 2007).

In the context of this study, Equity Theory helps explain why pay inequality is experienced as unfair when pay structures are unclear, inconsistently applied or perceived to favour particular individuals or groups. The theory suggests that employees assess the fairness of work outcomes by comparing their input–output ratios with those of their peers (Hasyim & Bakri 2024). When employees perceive that their inputs relative to outcomes are lower than those of others in comparable roles, feelings of inequity may arise (Malik & Singh 2022). Equity Theory, therefore, provides a framework for evaluating the perceived balance between individual contributions and organisational rewards (Idemobi, Ngige & Ofili 2017). Participants’ narratives indicate that such conditions intensify social comparison processes, leading employees to question whether their contributions are appropriately recognised and valued (Greenberg 1990). When perceived imbalances persist, dissatisfaction may manifest in reduced motivation, emotional withdrawal or consideration of alternative employment (Ambrose & Schminke 2009). Equity Theory thus offers insight into the cognitive and evaluative processes through which pay inequality shapes employee attitudes and behavioural responses.

Social Exchange Theory provides a complementary perspective for understanding how employees interpret pay inequality within the broader employment relationship (Homans 1958). Developed by George Homans, the theory conceptualises social interaction as a series of exchanges in which individuals evaluate relationships based on perceived rewards and costs (Homans 1961). Over time, repeated exchanges generate expectations of reciprocity, trust and mutual obligation, which shape the quality and stability of social relationships (Cook et al. 2013). Within the employment context, Social Exchange Theory frames work as an ongoing relational exchange in which employees contribute time, effort and commitment in anticipation of fair treatment, appropriate rewards and organisational support (Blau 1964; Cropanzano & Mitchell 2005). When these expectations are met, the exchange relationship is reinforced, strengthening trust and commitment.

Reciprocity is a central principle of Social Exchange Theory, whereby the expectation of mutual benefit fosters obligation and sustained engagement (Gouldner 1960; Molm (2010). In this study, the theory helps explain how perceived pay inequality is interpreted as a breach of reciprocal expectations. Participants’ accounts suggest that repeated experiences of unfair or opaque remuneration decisions undermine trust in the organisation and weaken employees’ sense of obligation to remain committed. As perceptions of unfairness accumulate over time, employees describe gradual psychological withdrawal, reduced discretionary effort and increased openness to leaving the organisation. Social Exchange Theory, therefore, provides insight into the relational and temporal processes through which pay inequality erodes commitment and shapes retention-related behaviour.

Together, Equity Theory and Social Exchange Theory provide a complementary lens for understanding how employees evaluate and respond to pay inequality. Equity Theory explains how employees assess fairness through comparative evaluations, while Social Exchange Theory explains how these evaluations shape the quality of the employment relationship over time. Building on this foundation, the study advances an integrated conceptual framework that explains how fairness perceptions translate into relational exchange outcomes and, ultimately, employee retention.

Pay inequality refers to differences in remuneration among employees performing comparable work and may arise from factors such as gender, race, job level, tenure and discretionary managerial practices (Kanten & Pazarcik 2025). In evaluating the fairness of pay, employees consider both the absolute level of remuneration and how their pay compares with that of others, as well as the balance between pay and perceived productivity relative to peers. As Adams (1963) observed, inequity is perceived when individuals believe that their job inputs and outcomes stand in an unfavourable relation to those of others, with negative reactions intensifying as perceived inequity increases. While some variation in pay may be justified by differences in skills, responsibility or performance, inequality becomes problematic when such differences are perceived as unfair, unexplained or inconsistently applied (Gutierrez, Obloj & Zenger 2025; Strah et al. 2024). Research further indicates that opaque pay structures and limited transparency amplify perceptions of inequity, particularly in contexts shaped by historical and structural disadvantage, such as South Africa (Mabungela, Nyusani & Davids 2025).

Within the South African labour market, pay inequality remains closely associated with gender and race, reflecting the enduring legacy of apartheid era labour segmentation (Dlanjwa 2025; Gumede et al. 2026). Despite legislative frameworks aimed at promoting equal pay for work of equal value, disparities persist across sectors and occupational levels (Mabaso & Mdluli 2025). These inequalities extend beyond material outcomes, as remuneration also functions as a symbolic marker of recognition, status and organisational value (Filippi et al. 2025). Consequently, pay inequality shapes how employees evaluate their standing within organisations and engage in both internal and external comparisons (Gutierrez et al. 2025; Strah et al. 2024).

Recent research has increasingly emphasised employees’ subjective perceptions of pay inequality, rather than objective wage gaps alone (Cullen 2024; McGee et al. 2024). Even where pay differences exist, it is employees’ interpretations of whether these differences are justified and procedurally fair that determine their influence on attitudes and behaviour (Gupta et al. 2024; Mirbabaie et al. 2025). This shift highlights the importance of examining how pay inequality is experienced and understood in everyday organisational contexts, providing a strong rationale for qualitative inquiry.

Employee retention remains a persistent challenge for organisations across sectors (Alhmoud & Rjoub 2020). It refers to an organisation’s ability to retain its workforce over time and is shaped by a combination of financial, psychological and relational factors (Michael 2008). From a managerial perspective, retention involves deliberate practices that encourage employees to remain with the organisation, including fair reward systems, supportive management relationships and healthy working conditions (Cascio 2003). High turnover imposes significant costs through recruitment, training and the loss of institutional knowledge, rendering retention a strategic priority for organisations (De Vos et al. 2025). Although compensation is not the sole determinant of retention, it remains a central influence on employees’ decisions to stay or leave, particularly in competitive labour markets (Mayowan et al. 2025).

Research has consistently linked perceptions of unfair pay to reduced job satisfaction, weakened organisational commitment and increased turnover intentions (Pei et al. 2025). Similar patterns have been observed in the FMCG sector, where pay-related inequities are associated with adverse employee attitudes and retention outcomes (Saw 2025). Employees who perceive that their compensation does not adequately reflect their contributions or compares unfavourably with that of peers are more likely to disengage and consider alternative employment (Oladimeji 2024). Retention decisions, however, are rarely immediate. Instead, they unfold gradually, with dissatisfaction accumulating, commitment eroding and psychological detachment preceding the eventual decision to exit (Georgiadou, Vezyridis & Glaveli 2025).

In sectors such as FMCG, where external employment opportunities may be readily available, retention is further shaped by employees’ perceptions of alternative labour market options (Bobek, Kreinecker & Horvat 2025). When pay inequality is perceived as persistent and unlikely to change, employees may tolerate short-term dissatisfaction while remaining open to exit opportunities (Nagel 2025). This highlights retention as a dynamic process shaped by ongoing evaluations of fairness, opportunity and reciprocity rather than a single decision point (Shinde 2025).

Perceptions of fairness play a central role in linking pay inequality to retention outcomes (Shinde 2025). From an equity perspective, employees evaluate the balance between their contributions to the organisation and the rewards they receive, often through social comparisons with colleagues (Cullen 2024). When this balance is perceived as unequal, employees experience psychological discomfort and attempt to restore equity by reducing effort, withdrawing psychologically or exiting the organisation altogether (Shinde 2025).

Social exchange perspectives further emphasise the relational nature of employment relationships. Work arrangements are sustained through reciprocal exchanges in which employees contribute time, effort and loyalty in anticipation of fair treatment and appropriate rewards (Saraiva & Nogueiro 2025). When pay practices are perceived as inconsistent, opaque or biased, the quality of the exchange relationship deteriorates (Shinde 2025). As a result, trust in the organisation diminishes, and employees may feel that their contributions are no longer recognised or valued (Bahadır et al. 2024).

Organisational justice perspectives integrate these insights by highlighting the importance of both distributive justice, the perceived fairness of outcomes such as pay and procedural justice, the perceived fairness of the processes through which pay decisions are made (Obalade & Mtembu 2023). Even when pay outcomes are unfavourable, transparent and consistently applied procedures can buffer negative reactions and sustain commitment (Aggarwal et al. 2025). Conversely, ambiguous or highly discretionary processes tend to intensify perceptions of injustice and accelerate disengagement. Collectively, these perspectives suggest that pay inequality influences retention not only through material consequences but also through its effects on fairness perceptions, trust and the overall quality of the employment relationship.

Building on the preceding discussion, this study develops an integrated analytical framework that links Equity Theory and Social Exchange Theory to explain how pay inequality influences employee retention. Rather than treating these theories as parallel explanations, the study conceptualises them as sequential and interrelated processes. Firstly, perceived pay inequality activates comparative evaluations, consistent with Equity Theory (Adams 1963, 1965), whereby employees assess the balance between their inputs and outcomes relative to relevant others. When discrepancies are perceived as unjustified, these evaluations generate feelings of inequity and dissatisfaction. Secondly, these fairness evaluations extend beyond cognitive assessment to influence the relational exchange between employees and the organisation. Drawing on Social Exchange Theory (Blau 1964; Cropanzano & Mitchell 2005), perceived inequity is interpreted as a breach of reciprocity, undermining trust, obligation and commitment over time. Thirdly, as these perceptions accumulate, they contribute to psychological withdrawal, reduced discretionary effort and increased openness to external opportunities, ultimately shaping employee retention outcomes. By integrating these perspectives, the study positions pay inequality as both a distributive and relational phenomenon. This framework advances existing literature by demonstrating how cognitive fairness judgements (Equity Theory) and relational exchange dynamics (Social Exchange Theory) operate together to explain the gradual and cumulative nature of disengagement and turnover risk in inequality-sensitive organisational contexts. Figure 1 illustrates the integrated conceptual framework underpinning the study, showing how pay inequality is theorised to influence employee retention through sequential cognitive and relational processes.

The current study employed a qualitative research design grounded in an interpretivist paradigm (Saunders et al. 2023). Interpretivism assumes that social reality is socially constructed and best understood through individuals’ meanings and interpretations, making it well suited to exploring how employees and managers perceive pay inequality in relation to talent retention (Adil et al. 2022). A qualitative approach enabled an in-depth examination of participants’ lived experiences and sense-making processes within a commission-driven organisational context (Creswell & Creswell 2018). This study seeks to understand better whether pay inequality influences employee retention in the South African FMCG sector.

The study was conducted within the FMCG sector in South Africa, focusing on employees based at the head office of a large, nationally operating organisation. The organisation is characterised by a hierarchical structure comprising functional departments such as sales, marketing, finance and operations. It employs a structured remuneration system that includes fixed salary bands, performance-based incentives and benchmarking against industry standards, although participants reported variability in their implementation. The FMCG sector was selected because of its significant contribution to the South African economy. According to Statistics South Africa (2024), the manufacturing sector recorded a 0.2% increase in gross domestic product (GDP) in the fourth quarter of 2023, contributing to an annual real GDP growth of 0.5%.

Participants were selected using purposive sampling to ensure the inclusion of information-rich cases relevant to the research objectives (Campbell et al. 2020). The study population comprised permanent employees working at the head offices of an organisation within the FMCG industry. Twelve individuals were initially recruited for participation. However, one participant withdrew before data collection, resulting in a final sample of 11 interviewees. Participants represented a range of organisational roles, including junior professionals, middle managers and senior managers across departments such as sales, finance and operations. This diversity enabled the study to capture multiple perspectives on pay practices and fairness perceptions across hierarchical levels. This sample size was considered sufficient for qualitative inquiry, as prior research indicates that data saturation in interview-based studies is often achieved within this range (Guest, Bunce & Johnson 2006). To be eligible to participate, employees had to have been employed by the organisation for at least 12 months, ensuring adequate exposure to organisational pay practices and employment processes. Participants also needed to occupy roles involving either managerial responsibility or a direct reporting relationship, such that they either supervised others or reported to a manager. Only permanently employed, full-time employees were included in the study; individuals in temporary, fixed-term or expatriate positions were excluded. Sampling continued until data saturation was reached, as indicated by the recurrence of themes and the absence of substantively new insights. The demographic profile of the participants is presented in Table 1.

The data collection method used in this study was semi-structured interviews. Adeoye-Olatunde and Olenik (2021) explain that semi-structured interviews enable researchers to explore participants’ unique perspectives rather than relying on generalised accounts of a phenomenon. This approach facilitated the collection of rich, detailed insights into how employees experience and interpret pay inequality and how these perceptions influence talent retention within the organisational context. The interview guide consisted of approximately 10–12 open-ended questions covering experiences with pay determination, fairness perceptions, social comparison processes and retention-related decisions. Interviews lasted 45–60 min and were conducted via Microsoft Teams (Redmond, WA, USA). This format provided flexibility while ensuring consistency across interviews, allowing participants to elaborate on their experiences while enabling the researcher to probe for deeper understanding where necessary.

Data recording included taking notes and recording the interviews. The recording and transcription features of Microsoft Teams were used to capture and document interviews. For accuracy, interviews were transcribed, corrected and stored on a secure, password-protected computer.

Interview data were analysed using thematic analysis, following a systematic process of familiarisation, coding and theme development (Braun & Clarke 2021). This approach was appropriate for identifying both common and divergent patterns of meaning related to fairness perceptions and talent retention within an interpretivist framework. Braun & Clarke (2021) endorse thematic analysis for South African qualitative studies because of its suitability for exploring context-specific organisational phenomena. The method enabled the systematic generation of insights and supported the achievement of the study’s research objectives (Yam et al. 2023). Data analysis followed Braun and Clarke’s (2021) approach, beginning with familiarisation with the data through repeated reading of the transcripts. Initial open coding was conducted manually, followed by the development of focused codes and the identification of broader themes. Codes and themes were iteratively refined to ensure internal consistency and alignment with the dataset.

In line with the naturalistic paradigm, rigour in qualitative research is established through trustworthiness rather than conventional validity criteria (Guba & Lincoln 1986). Trustworthiness comprises credibility, transferability, authenticity, confirmability and dependability. Credibility refers to the extent to which findings accurately reflect participants’ meanings and was enhanced through prolonged engagement, triangulation, member checking and reflexivity. In this study, the researcher adopted a reflexive stance, acknowledging their role as an active interpreter of participants’ accounts (Lincoln & Guba 1985). To minimise interpretive bias, reflexive journaling was maintained, and emerging interpretations were critically examined through peer debriefing, ensuring that findings remained grounded in participants’ narratives rather than in the researcher’s assumptions. Transferability concerns the applicability of findings to similar contexts and was supported through thick description. Authenticity ensures fair representation and participant involvement in the construction of meaning. Confirmability addresses the extent to which findings are grounded in participants’ accounts rather than in the researcher’s bias and is supported by audit trails. Dependability reflects methodological consistency and was strengthened through peer debriefing and transparent analytic procedures.

Ethical considerations were integral to the study, with the researcher–participant relationship grounded in trust and respect (Hammond & Wellington 2012). Ethical clearance to conduct this study was obtained from the University of Johannesburg Ethics Committee. The ethical clearance number is IPPM-2025-935(M). Participation was voluntary, and participants could withdraw without penalty. Informed consent was obtained prior to data collection. Anonymity and confidentiality were maintained throughout the study, and all data were securely stored and protected (Morse & Coulehan 2015).

This theme captures how employees made sense of pay inequality as a fundamental issue of fairness and justice within the organisation. Participants described remuneration practices as uneven, discretionary and insufficiently grounded in consistent performance criteria. These perceptions extended beyond dissatisfaction with pay to shape broader evaluations of organisational legitimacy and the credibility of meritocratic principles. Perceived unfairness thus emerged not merely as a reaction to pay differences, but as a lens through which employees assessed the integrity and fairness of organisational systems.

This theme reflects how the absence or partial availability of information regarding compensation processes intensified perceptions of pay inequality. Participants emphasised that unclear communication and limited understanding of pay structures not only created uncertainty but also weakened trust in organisational decision-making. A lack of transparency therefore functioned as both an informational and relational deficit, amplifying perceptions of unfairness while undermining confidence in organisational intentions.

This theme captures the social processes through which employees evaluated the fairness of their pay. Participants described comparison as an embedded organisational practice through which pay outcomes were interpreted, justified or contested. These comparisons occurred both internally, among peers, and externally, against market standards. Social comparison emerged as a critical mechanism through which employees translated pay differences into meaningful judgements about fairness and value.

This theme reflects how perceptions of pay inequality translated into behavioural and attitudinal outcomes over time. Participants described retention not as a single decision but as a gradual process involving reassessment, disengagement and openness to external opportunities. Retention outcomes emerged from accumulated fairness evaluations rather than immediate reactions to isolated pay decisions.

The findings offer clear practical implications for organisations in the South African FMCG sector seeking to improve employee retention through fairer pay practices. Firstly, the study shows that pay inequality is experienced primarily as a fairness and legitimacy concern rather than solely as a financial issue. Employees’ responses were shaped less by absolute pay levels than by whether remuneration outcomes were perceived as justified, consistent, and transparent. Retention strategies that focus solely on increasing pay without addressing perceived inequities or opacity are therefore unlikely to be effective. Organisations should prioritise internally coherent pay structures by implementing formalised salary band frameworks that define minimum, midpoint and maximum ranges for each role and explicitly link these to job evaluation, performance ratings and career progression pathways.

Secondly, the findings highlight the importance of procedural and informational clarity in pay governance. Uncertainty about how salaries, increases and market benchmarks were determined undermined trust and intensified social comparison. Fast-moving consumer goods organisations should move beyond vague references to ‘market-related pay’ by conducting regular pay equity audits (e.g. annual or biannual reviews comparing pay across roles, gender and tenure) and providing structured explanations of pay bands, progression criteria and benchmarking processes. Line managers should be equipped with standardised communication guidelines and training to ensure that pay-related decisions are explained consistently and credibly, in alignment with organisational policy.

Thirdly, the study points to a transparency paradox. Communication initiatives that lack corrective action may heighten frustration by confirming existing inequities. Transparency efforts should therefore be aligned with clearly defined remediation plans, such as phased salary adjustments, targeted equity corrections or structured review cycles, even where immediate changes are not feasible. In addition, organisations should establish formal grievance and review mechanisms through which employees can raise concerns about pay fairness and receive timely, evidence-based feedback.

Fourthly, managers should attend to early indicators of retention risk, such as psychological withdrawal, reduced discretionary effort and disengagement. These indicators can be monitored through regular one-on-one check-ins, employee engagement surveys and performance discussions. Addressing pay-related concerns at this stage through transparent dialogue and, where possible, corrective action may help prevent dissatisfaction from escalating into voluntary turnover.

This study was conducted within a single FMCG organisation, which may limit the transferability of findings. The reliance on self-reported perceptions reflects subjective experiences of pay inequality rather than objective remuneration data. In addition, the qualitative sample size does not allow for sector-wide generalisation. Future research could examine multiple organisations or industries to enable comparative analysis. Mixed-methods studies combining qualitative insights with objective pay data may further clarify how perceived and actual pay inequality interact. Longitudinal research could examine how fairness perceptions develop over time and how they influence retention decisions.