Which theory suggests that employees expect their wages and benefits to reflect their work effort compared to their peers?

Equity Theory is the correct choice because it posits that employees assess their contributions (such as work effort, skills, and time) against the contributions of their peers while also considering their compensation (wages and benefits). This theory emphasizes fairness and balance in the workplace, suggesting that employees are motivated by a desire to maintain equity in the workplace. When they perceive inequity, it can lead to demotivation and dissatisfaction. Therefore, if an employee feels that their pay does not match their effort relative to their peers, they may feel undervalued, which could ultimately affect their productivity and engagement.

In contrast, Agency Theory focuses on the relationship between principals (such as shareholders) and agents (such as company executives) and is concerned with aligning the interests of both parties. Motivation-Hygiene Theory, also known as Herzberg's Two-Factor Theory, differentiates between factors that result in job satisfaction and those that prevent dissatisfaction but does not specifically address the comparative element between peers. Maslow's Hierarchy of Needs outlines a progression of human needs from basic physiological requirements to self-actualization and does not focus on wage and benefit comparisons among employees.