Linking Merit Pay with Competitive Strategy

1. Linking Merit Pay with
Competitive Strategy
Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt)
Professor
Al-Qurmoshi Institute of Business Management
Hyderabad
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2. Merit Pay
Merit pay is the increase in pay based on goals or
achievements set by an employer, rather than a pay rate
based on a union contract or a defined pay scale for a
position.
It is also known as pay for performance.
Merit pay typically involves the supervisor meeting with
the employee to discuss the employee's work and to
award an increase or a bonus based on performance.
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3. Who participates in Merit Pay
Programs?
Merit pay program most often is introduced in
private sector ‘for profit’ of the economy, rather than
in public sector organisation
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4. Elements of Merit Pay
Managers rely on objective as well as subjective
performance indicators to determine whether an
employee will receive a merit increase and the
amount of increase warranted
Employees must know that their efforts in meeting
production quotas or quality standards will lead to
pay raises
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5. Elements of Merit Pay (Contd.)
Companies those use merit programs, must ensure
that the funds needed to fulfil these promises to
compensate employees, are available
Organisations should make adjustments to base pay
according to changes in the cost of living or inflation
before awarding merit pay raise
Effective performance appraisals can ensure
effective merit pay programs.
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6. Elements of Merit Pay (Contd.)
Companies those use merit programs, must ensure
that the funds needed to fulfil these promises to
compensate employees, are available
Organisations should make adjustments to base pay
according to changes in the cost of living or inflation
before awarding merit pay raise
Effective performance appraisals can ensure
effective merit pay programs.
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