HR Guide to the Internet:
Compensation: Incentive Plans: Merit Pay

Merit Pay: An incentive plan implemented on an institutional wide basis to give all employees an equal opportunity for consideration, regardless of funding source. The merit increase program is implemented when funds are designated for that purpose by the institution's administration, dependent upon the availability of funds and other constraints. .

Advantages
  • Allows the employer to differentiate pay given to high performers.
  • Allows a differentiation between individual and company performance.
  • Allows the employer to satisfactorily reward an employee for accomplishing a task that might not be repeated (such as implementation of new systems).
Disadvantages
  • The pay is subjective.

 

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