| Summary: | Human resource development literature highlights that pay level is a crucial compensation design issue. The ability of the management to properly design the level of pay according to external and internal organisational factors may have a signifi cant impact on personal outcomes, i.e. job satisfaction, job commitment,and job performance. More importantly, a thorough review of such relationships
revealed that effect of pay level on personal outcomes is indirectly affected by feelings of interactional justice. Although the nature of this relationship is interesting, little is known about the influence of interactional justice in compensation programme models. Therefore, this study was conducted to measure the mediating effect of interactional justice in the relationship between
pay level and personal outcomes. A survey research method was used to gather 917 usable questionnaires from employees who have worked in Malaysian institutions of higher learning. The outcomes of stepwise regression analysis
showed three important findings: firstly, the relationship between interactional justice and pay level would increase job satisfaction. Secondly, the relationship
between interactional justice and pay level would increase job commitment.Third, relationship between interactional justice and pay level would increase job performance. This result confirmed that interactional justice does act as a
full mediating variable in the pay system model of the organisation sample. In addition, the implications of this study on compensation theory and practice,conceptual and methodological limitations, and directions for future research are discussed.
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