Test 1

What is merit pay?
Merit pay or a merit raise is any salary increase that is awarded to an employee based on his or her individual performance. It is different from a bonus in that it usually represents a continuing increment, whereas the bonus represents a onetime payment. Although the term “merit pay” can apply to the incentive raises given to any employees—office or factory, management or non-management— the term is more often used with respect to white-collar employees, and particu­larly professional, office, and clerical employees. Merit pay has both advocates and detractors and is the subject of much debate. Advocates argue that only pay or other rewards tied directly to per­formance can motivate improved performance. They contend that the effect of awarding identical pay raises to all employees (without regard to individual per­formance) may actually detract from performance by showing employees that they will be rewarded the same regardless of how they perform.

Explain the role of performance appraisals in merit pay programs.
It is critical that performance appraisals be carried out effectively. Traditional merit pay plans have two basic characteristics: (1) Merit increases are usually granted to employees at a designated time of the year in the form of a higher base salary (or raise)-, and (2) the merit raise is usually based exclusively on individual performance, although the overall level of com­pany profits may affect the total sum available for merit raises. In some cases, merit raises are awarded in a single lump sum once a year, without changing base salary. Occasionally, awards are tied to both individual and organizational performance.

Describe the advantages of pay-for-knowledge pay programs to employees
Employees usually like pay-for-knowledge pay