Perceived unfairness in compensation can negatively impact employee motivation and organizational performance. When employees perceive inequity in pay, it may lead to dissatisfaction, turnover, absenteeism, and reduced commitment, thereby affecting overall performance. Addressing perceptions of fairness in distributing incentives is critical for motivating academic staff and enhancing their productivity. This study aimed to examine the effect of perceived equity on the relationship between employee compensation and employee performance in chartered public universities in Kenya. Grounded in Equity Theory, the research employed a descriptive cross-sectional design, collecting quantitative data at a single point in time from academic staff across 23 Kenyan chartered public universities. A multistage sampling technique was used to select a sample of 370 respondents from a population of over 8,281 academic staff, with 247 questionnaires returned (response rate of 69%). Primary data was gathered through structured questionnaires measuring employee compensation, perceived equity, and performance. Reliability testing yielded a Cronbach’s alpha of 0.920, ensuring data consistency. Data analysis involved descriptive and inferential statistics, including regression analysis, to explore moderating effects. The findings indicated that perceived equity significantly moderates the relationship between employee compensation and performance (R²=0.282, F=49.356, p<0.05). The study concludes that fostering perceptions of fairness in compensation strategies can enhance employee motivation and performance outcomes. It recommends that universities develop transparent and equitable reward systems to optimize staff motivation and organizational effectiveness.