Internal Equity Law and Legal Definition

Internal equity is situation that results when people feel that performance fairly determines the pay for each individual with a certain job or that relative difficulty results in appropriate differences in pay rates between jobs. Worker dissatisfaction may arise when internal equity principles aren't met.

Internal equity studies analyze the nature of a particular position including:

1.    Skill

2.    Effort

3.    Responsibility

4.    Working Conditions.

The internal equity study determines if there is "pay equity" between like positions. This study ensures compliance with the Federal Equal Pay Act and state laws, thereby avoiding potential lawsuits. Additionally, an internal equity study makes good managerial sense in that employee morale, and consequently, productivity will increase.