An employee at Clearwater Electronics has contacted the HR department about her salary. She had been told that a recent hire with the same job and skill set was offered $1,000 more per year than she was. She wanted to know if the rumor was true and, if so, what the company was going to do to about the situation. After reviewing both jobs, it was determined that the employee should be given a pay raise to match that of the recent hire plus another 25 cents per hour. The employee was appeased, but the situation was messy and awkward. Given this example, why is it important that Clearwater Electronics have internal equity in its compensation system

Internal equity is the process by which a company ensures that compensation for a particular job role is uniform. It is put in place to create fairness between coworkers.

If there is a disparity in wages of staff on the same level, it will cause dissatisfaction and feeling that they are not appreciated. Employees may eventually leave.

In the given scenario an employee had been told that a recent hire with the same job and skill set was offered $1,000 more per year than she was.

To pacify her the company gave her a pay raise to match that of the recent hire plus another 25 cents per hour.

If there was a good internal equity this awkwardness would have been avoided.