The concept of pay performance is attractive to the public sector because its basis is rooted in the perception that superior performance should be acknowledged and rewarded. Its implementation is varied, consisting of individuals, work groups, or departments being evaluated and having financial incentives distributed as base pay increases, one-time bonuses, or a combination. “Merit pay” is a term typically associated with pay for performance where individual performance ratings are directly correlated to annual salary increases in hopes that the incentive with increase employee effort and productivity. However, the critical component that directly affects success with this pay structure is employee perception on how equitable and attainable the expectations are within the incentive plan. Employees form beliefs and take actions based on how satisfied they are with their jobs as well as an opinion about state agencies as places to work and pursue careers. If these employees feel that the performance appraisal systems are not fair, then they will not be motivated by the premise of linking their pay to incentives. Moreover, these same employees will eventually become disgruntle and work at less productive rates because they feel as though “politics” or favoritism determines the outcome of their evaluations not personal achievement. Many employees were attracted to public sector jobs because of they were perceived to be secure with good benefits. Now, public agencies are moving from the traditional seniority mentality and are becoming specialized to promote higher levels of productivity. “To be effective, the total compensation package, pay and benefits, must meet the needs of employees by providing pay and benefits that are fair compared to other employees and to the job market. For employers, a compensation package is effective when economic rewards are