Why salary alone does not create a sense of fairness and how employers can ensure both

20.10.2025

Irja Rae, Managing Partner, Figure Baltic Advisory

Salary is a central part of working life – it is compensation for work done, but also a symbol of how we are valued and appreciated. We often ask whether a salary is right: does it correspond to the market situation, the position, or the level of colleagues in similar roles? Less often, however, do we ask whether the compensation seems fair. These two concepts are not synonymous – and understanding the difference between them is the key to employee satisfaction and trust.

The "right" salary is found in tables, the "fair" salary is found within people

The "right" salary is a technical figure. It is based on market data, salary ranges, and organizational rules.

A "fair" salary, on the other hand, is a personal experience – the feeling that I have been treated honestly, respectfully, and transparently. While the former exists in tables, the latter exists within a person. Ultimately, subjective experience determines whether an employer is trustworthy. 

Social psychology distinguishes between four main types of justice:

1. Distributive justice – is the salary proportional to responsibility and contribution compared to others?
2. Procedural justice – are clear and understandable principles followed when determining salaries?
3. Interpersonal justice – was I treated with respect and humanity?
4. Informative justice – was I given sufficient explanation as to why my salary is what it is, and was I involved in the process?

The combination of these four factors creates perceived fairness – an overall feeling of whether I have been treated fairly. Numbers alone do not create this.

The "right salary" is not just the market average

Justifying salary levels solely on the basis of the "market average" may sound objective, but it is misleading. 

National statistics calculate the average across all occupations and sectors – including top managers and unskilled workers. Nearly two-thirds of workers in the Baltic States earn less than this.

This does not mean that the employer pays little. Often the reason is that the position or sector is simply lower-level. The average is a statistical indicator, not a norm that everyone should receive.

Without explanation, comparing oneself to the average can create an expectation among employees that their salary should match it. In reality, remuneration depends on the value of the position, responsibility, the salary level in the sector, and other factors.

Does a higher salary always mean more complex work?

It is often assumed that the higher the salary, the greater the responsibility and the more complex the work. Yes, this may be the case – but not always. Nowadays, the level of remuneration is often determined by specific skills and knowledge that are difficult to find in the labor market.

Some specialists may earn significantly more than others, even though their responsibilities are not necessarily greater. This happens especially in fields where skills are rare or demand exceeds supply – for example, certain IT development profiles, cyber security experts, highly qualified engineers, or medical professionals with specialized knowledge.

Sometimes, critical or hard-to-replace skills must be paid for at a price significantly higher than the market rate. This may be fair and necessary from the organization's point of view, but without explanation, a significant difference in pay may seem unfair to colleagues. It is therefore important to explain where such salary levels come from and how they relate to the organization's goals and market realities.

Transparency as the key to trust

Salary transparency does not mean that all figures must be public. It means that employees understand how salary decisions are made and that differences are explained to them in a convincing manner. Transparency reduces assumptions and reinforces the feeling that the organization has nothing to hide.

Fair pay is a strategic decision

Studies confirm that employees usually leave their jobs not because of the work itself, but because of unfair treatment or remuneration. Even the best-designed systems will not work if managers are unable to create and communicate a sense of fairness. Honest and explanatory conversations, not avoiding difficult topics, and valuing employees are key factors.

Fair pay is not an expense, but an investment. It builds trust, reduces turnover, and increases commitment. When people feel that they are understood and communicated with openly, they respond with cooperation and loyalty.

Right and fair – both are multifaceted

Both "right" and "fair" pay are complex constructs that are influenced by market data, job value, organizational strategy, labor market conditions, and the subjective experience of the employee. Fair pay requires an objective and data-driven approach, while equitable pay requires a human touch and trust. These are not synonyms, but neither is sufficient on its own – long-term success is ensured by remuneration that is both fair and equitable.

How to ensure that pay is both fair and equitable – 5 steps

1. Create a clear and data-driven pay philosophy – define how salaries are determined and how they relate to market data and job value.
2. Evaluate positions using a transparent methodology – use standards that allow you to compare roles of similar value regardless of the person.
3. Explain the context – give employees an understanding of which market or average is being compared and why.
4. Check for systemic bias – regularly monitor that compensation is applied equally regardless of gender, age, or other factors.
5. Communicate openly and respectfully – explaining compensation decisions and engaging in trusting dialogue reduces assumptions and reinforces a sense of fairness.