What term describes the tendency of underpaid employees to inflate the value of the rewards they receive?

The correct term that describes the tendency of underpaid employees to inflate the value of the rewards they receive is "Compensation distortion." This concept reflects how employees perceive and value their rewards in the context of their compensation. When individuals feel that they are being inadequately compensated for their efforts, they may overestimate the significance or value of non-monetary rewards or recognition they receive as a way to rationalize their situation or to cope with feelings of unfairness.

This phenomenon emphasizes the psychological aspects of compensation, highlighting that perceptions of fairness and adequacy in rewards can significantly influence how rewards are valued. It's not just about the tangible rewards but also about how they are perceived based on individual expectations and context. Understanding this can help organizations recognize the importance of fair compensation practices to maintain motivation and satisfaction among employees.