Effective Merit Pay Systems

Merit pay is a system that provides bonuses for workers who perform their job effectively, according to measurable criteria. An effective merit system should promote employee recruitment and retention, adequately reward conscientious performance of normal duties and responsibilities, and provide incentives that encourage distinguished, innovative and creative achievements to meet unusual challenges and opportunities when they arise. "If the jobs within the company are not given proper analysis for content and value: there will be a disconnect between pay for each level and recognition of completion of each level of the job to warrant the pay level." (J. Martocchio, 2010)

A salary system should be designed to promote internal salary equity as well as external salary equity. The organization should monitor and ensure that employee salaries continue to be commensurate with individual employee's skills, abilities, and experience.

A performance based merit system should engender the type, quantity, and quality of performance that contributes to the achievement of institutional and unit missions and goals. The reward system also needs to account for a variety of ways that an employee may support these missions and goals.

A performance based merit system needs to establish a clear connection between employee performance and reward. Meritorious performance should be rewarded in tangible ways. A department of unit must clearly identify the normal expectations and performance standards that are expected of all employees. Through this process, indicators must be identified for performances that fall below standard expectations for merit as well for those types of achievements that surpass the unit's standard expectations.

Performance appraisal process should provide employees with constructive comments that enable them to develop