<p>The primary form of private enterprise governance and a key contributor to China’s economic expansion are family enterprises. The seamless transfer of family enterprises from one generation to the next contributes to the steady advancement of the private economy. Although the internal compensation distribution mechanism of firms may need to be adjusted due to the intergenerational transmission of family enterprises, there isn’t enough pertinent theoretical investigation in the literature currently in publication. In order to investigate the effects of intergenerational transmission of family enterprises on the internal wage disparity of enterprises and its mechanism, this article uses the Chinese listed family enterprises from 2011 to 2022 as samples. According to the study’s findings, the internal wage disparity is greatly widened when family enterprises are passed down through the generations. A number of robustness tests show that the conclusion remains valid. By increasing R&amp;D investment, speeding up digital transformation, increasing the size of the board of directors, increasing the employment rate of highly skilled workers, and decreasing the capital investment model, the mechanism test demonstrates that the intergenerational transmission of family enterprises will increase the internal wage disparity of enterprises. According to heterogeneity analysis, the relationship between internal pay disparity and the intergenerational transmission of family enterprises is also influenced by the following factors: the enterprise’s size, corporate governance level, listing time, leverage structure, industry competition, percentage of family members on the board of directors, supervisors, and senior management, and familyization style. This study is very important since it emphasizes the value of family enterprises’ intergenerational transmission, enhances the internal pay distribution mechanism’s motivating elements, and encourages the growth of private companies.</p>