General Business BUS206 Lecture Notes - Lecture 11: Merit Pay
22 Sep 2020
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Document Summary
Pay that varies with some measure of individual, team or organizational performance also called variable pay plans. Increasingly popular due to: these plans have a positive impact on performance if they are designed well signal a movement away from entitlements. A merit pay system links increases in base pay to how highly employees are rated on a subjective performance evaluation. Doesn"t achieve the desired goal: improving employee and. Allocate enough money to truly reward performance. Make sure size of merit increase differentiates across performance levels. Specify a continuum describing different levels from low to high on performance measure. Decide how much of a merit increase is given for different levels of performance. A more complex guideline ties pay not only to performance but also to position in the pay range see exhibit 11. 3. Viewed as less of an entitlement than merit pay. Less expensive than merit pay over the long run.
