MERIT PAY AND INDIVIDUAL INCENTIVE PLANS
Merit pay is a reward depends on how well a worker has completed the assigned job. The payout is based on individual employee's performance. Performance is appraised in a subjective manner. Advocates of merit pay call it the greater valid type of pay enhances. Rewarding the excellent performers with the highest pay is claimed to be a strongest motivator. Performance which is rewarded is possible to be repeated. People tend to complete things that are rewarded. In general speaking, particular are goal oriented and financial rewards may shape an individual's goals over time. While high achievers are rewarded, they set up the benchmarks for others to follow. Unluckily Merit raises may not always attain their intended purpose. Rather than a bonus, merit raise might be perpetuated year after year even while performance declines. While this occur, employees come to expect enhance and see it as being isolated to their performance. Evaluating merit, furthermore, is not easy. In most of the cases, merit grow may be depend on seniority or favouritisms or sometimes only to cover increasing inflationary pressures. Subordinates who are, socially, politically and familiarly associated inside & outside the organisation, who have clout and who can harm the supervisor in some way are possible to receive a big share of the merit pie than their performance can warrant. Compensation specialists discover fault with merit raise on the following grounds:
- Tying pay to objective may force people to be narrow-minded; they might focus on goals that are measurable, simple to achieve and avoid the more vital goals.
- It is hard to define and compute performance objectively.
- Employees fail to make the association between performance and pay.
- Every supervisor might not be a competent evaluator.
- There might be lack of honesty & cooperation among employees & management. Politics might come to pay a vital role in identifying meritorious performers.
- The size of merit award has little influence on performance.
Merit plans can work when the job is fine designed and the performance criteria are well assessable and delineated both.