THE IMPACT MECHANISM OF PAY EQUITY ON JOB PERFORMANCE: THE MEDIATING ROLE OF EMPLOYEE ENGAGEMENT AND THE MODERATING ROLE OF PSYCHOLOGICAL SAFETY

Based on the Collective Engagement Model, this study examines how compensation justice influences job performance through employee engagement and the moderating role of psychological safety. The study shows that procedural justice encourages emotional and behavioral engagement in flexible work arrangements, while distributive justice has a big effect on cognitive engagement in situations involving personalized compensation. Interactional justice demonstrates comprehensive positive effects on all engagement dimensions, enhancing employees' organizational identification and commitment. From the point of view of performance, the study shows that when employees are engaged in their jobs, they do a better job overall. This is because engagement affects cognitive, emotional, and behavioral aspects of the job, with the effects being most noticeable in collaborative settings. Psychological safety serves as a crucial buffer against environmental uncertainty and organizational complexity. Employees with higher psychological safety better perceive compensation justice's positive impact, while those with lower levels rely more on interactional justice to stimulate engagement. This study makes a contribution by (1) combining different aspects of fair pay; (2) creating a progressive path model with employee engagement as a mediator; (3) looking into psychological safety as a moderator; and (4) giving practical advice for personalized pay management to boost employee engagement and organizational performance.