1.0 IntroductionThis chapter includes the background of the study, problem statement, research objectives, includes both general and specific objectives, finally the importance of the study.1.1 Research BackgroundAccording to David E. Terpstra (2003), organizational compensation policies and practices play competitive roles in the business environment. However, the organization must be able to define and design a form of equity system that includes distributive equity (external equity, internal equity, individual equity) and procedural fairness in constructing the compensation system. Therefore, it is important for the organization to develop attractive remuneration and remuneration policies in order to be competitive with the market in a similar industry by adopting some form of relevant equity systems. Milkovich and Newman (1996) define wage distribution as the levels of compensation paid. for individual performance, human capital and professional responsibilities within the same organization. However, Gary Dessler (11th edition, 2008) believes that the manager should classify equity systems into four elements: i. External equity refers to the differences in job pay rates across companies.ii. Internal equity which measures the differences in job pay rates from one position to another in the same company.iii. Individual equity refers to the fairness of compensation paid by the company by examining individual performance in the same or very similar jobs within the company.iv. Procedural fairness refers to the decision made regarding the allocation of compensation by examining the fairness of processes and procedures. Employees received rewards that satisfied their needs and expectations (individual go...... middle of paper ...... ng the productivity of the organization (Lawler, 2003). The importance of leading this study is actually to check whether equity systems are considered when evaluating employee performance If equity systems are related to performance, most organizations should use equity systems. . in setting their pay rate It is learned that money is one of the motivating factors that can increase the credibility level of employees in terms of good results. , the organization can use individual fairness to evaluate the level of their performance before rewarding them Since most employees believe that the fairness rate is the most important element that must be taken into account. account by the organization, it is the responsibility of the organization to design a competitive compensation program that can benefit both parties..