Employee theft as a reaction to underpayment inequity: The hidden cost of pay cuts.

Abstract

Employee theft rates were measured in manufacturing plants during a period in which pay was temporarily reduced by 15%. Compared with pre- or postreduction pay periods (or with control groups whose pay was unchanged), groups whose pay was reduced had significantly higher theft rates. When the basis for the pay cuts was thoroughly and sensitively explained to employees, feelings of inequity were lessened, and the theft rate was reduced as well. The data support equity theory's predictions regarding likely responses to underpayment and extend recently accumulated evidence demonstrating the mitigating effects of adequate explanations on feelings of inequity.