Advantages

Employee Retention
Implement equity theory in a company that cuts down organizational expenses to a
higher degree, and this is one of its advantages. Employee retention results in
saving undue costs in the form of brain drain or training expenses that a company
has to bear when it hires new employees.

Attracting Talent
Organizations that implement the concept of equity theory in their work find it
easy to attract talent because every employee wants to be associated with a firm
that believes in fair treatment. Employees do not want to worry about a hidden
agenda that can lead to bias or preferential treatment for some of the elite
workforce.

Breadth by diversity
Diversity in a workplace is seen where the company believes inequitable behavior.
Here every employee has access to equal opportunities, and this is a significant
advantage for a firm because it gains intellectual capital and breadth via diversity

Aids in minimizing exploitation

An essential advantage of equity theory is that it minimizes the exploitation of the
employees. There is no discrimination between workers in terms of working
conditions, pay or bonus.

Disadvantage
The difference in perception
One of the most important disadvantages of equity theory is that there is a
difference in opinion about perception. It can be between an employer and
employee and also between different employees in the organization.

Exact comparison is impossible

Employees are comparing their inputs and outcomes with other employees in the
same as well as other organizations. There are lots of variables involved, and it is
not always easy to make viable comparisons between any person, product  or
service. This is a severe disadvantage and stops the concept from being fully
effective
All other factors are ignored
There are several factors involved while making comparisons. Equity theory is all
about perception and input and outcomes. All the other related factors are ignored,
and this becomes a severe disadvantage to it.

Does not predict everything

An essential disadvantage of equity theory is that it does not make any predictions
about overpayment conditions and how employees or individuals are going to
handle those specific conditions. It also does not take into account the individual
differences that have a direct impact on equity.