What is merit pay?
Merit pay is something that is referred to a performance- based pay. This includes bonuses or base pay higher for employees that complete the target goals or carry out their job role effectively. To measure this over a predetermined period of time.
The benefits and drawbacks of merit pay:
- Higher amounts of performance as employees will be rewarded.
- Performance will be related to the pay system, therefore, give the business advantage as the recruitment of employees with confidence and skills to work.
- More retention of employees that benefit the rewards from the pay system.
- Employees can be rewarded fairly if the goals/expectations are exceeding.
- By giving employees that performance better an increased pay allows the employers to differentiate.
- It can be said that merit pay is biased and subjective.
- Employees develop the expectation to a consecutive pay increase.