2012•The Encyclopedia of Human Resource ManagementRequires access
Merit Pay
Karen McMillen Dielmann
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Abstract
Merit pay is a wage or salary increase given by the company to an individual employee, usually based on his or her individual performance. The amount of the pay increase is usually determined by the supervisor’s evaluation of the employee’s performance. Those in favor of utilizing merit pay plans state that pay or other rewards that are tied directly to performance motivate employees to perform up to and above expected performance standards. Those who do not favor merit pay point to the inadequacy of many companies’ performance appraisal processes. As more companies are utilizing teams to accomplish tasks or specific projects connected with jobs, pay that is based only on an individual’s performance may encourage that person to be narrowly focused on his or her own goals and thus undermine teamwork. Controlled Vocabulary Terms Employee performance management applications; performance appraisal; Performance based rewards