Employees who perform well are rewarded with a form of compensation known as merit pay. Performance-based incentives are another name for it. In sales positions where an employee’s success is evaluated by the quantity of sales they make, merit pay is typical. It is also present in education, where a teacher’s grade may be used to determine whether or not they are a high achiever.
How is it operated?
A corporation establishes performance standards for its employees, and performance reviews are conducted either monthly or quarterly. A modest increase in basic pay, often around 3% annually, is given to employees who meet the qualifications.
How do incentives and bonuses differ from merit pay?
A bonus is a short-term payment, while merit pay is often increased to an employee’s base wage. Additionally, there are short-term incentives. There is no assurance that an individual who receives an incentive will continue to receive it the next year. Merit pay, however, is a steady increase in income.
