Pay dispersion is a concept where employers pay different amount of wages or salaries to their employees for the same skills and the same type of work.
Pay dispersion exists because of limited knowledge of employees about the wages of the other employees, and also because of employee experience, changing policies etc.
Pay dispersion takes into account several factors for determining the operationalization. They are like benchmarked pay levels, coefficient of variation, Gini Coefficient, etc.
1. Higher pay brings out better productivity, & the employees also puts in more effort
2. Differential inputs & marginal products, represents internal career & wage path that raise motivational levels & has effect upon the attitudes.
3. Greater pay dispersion generally is positively correlated with turnover, as and when the vertical pay dispersion is examined.
4. Organizations focusing on expectation enhancing are rather more successful than those focusing on pay dispersion.