What is Merit pay?

Whether you're a beginner or an expert, you will find this Glossary useful.

Merit pay refers to a performance-related pay which provides bonuses or base pay increases for employees who hit the target or perform their jobs effectively, according to measurable criteria over a predetermined period of time.

Merit pay definition

Merit pay refers to a performance-related pay which provides bonuses or base pay increases for employees who hit the target or perform their jobs effectively, according to measurable criteria over a predetermined period of time.


Advantages and disadvantages of merit pay

Commonly-cited advantages of merit pay include

- increased effectiveness as reward is tied to performance

- better company standards due to the recruitment of employees with the skills and confidence to work within a performance-related pay system

- increased retention of key employees who benefit from a pay system that rewards

- enables the employer to differentiate the high performers by giving them a higher pay

- if exceeding targets/expectations employees can be rewarded fairly.

- merit pay system is subjective and may be biased

- employees develop a tendency to expect consecutive pay raises

- competition between employees and acting in self-interest rather than in the interest of the company



TalentLyft ATS

Your Hiring Teammate

TalentLyft is intuitive and simple recruitment software specialized for SMBs.
Try it free for 14 days!
No credit card required, unsubscribe at any time.