Internal Equity Definition
Term Definition: Internal Equity
Internal equity is defined as the fairness criterion in the employment contract that offers fair wages based on the value of the employee within the organization.
Internal equity is a criterion adopted by organizations to ensure fairness in pay structure. The compensation awarded to employees is determined through internal equity and is calculated depending on the relative value of the employee. This equity is aimed at striking a balance in the compensation awarded to employees based on organizational hierarchy. The corresponding wages to each job profile are calculated after considering compensable factors which include job ranking, level of management, job classification, and level of status. Learn more about the motivation behind this type of compensation tool from our Internal Equity blog article.