Posted on by Judy

A frequently heard complaint about merit raises is that they do little to increase employee effort. What are the causes of this belief? Suggest ways in which the motivating value of merit raises may be increased

In a merit based pay, an individual’s performance is measured objectively and a pay raise (permanent) is provide based on that. The objective measures is a one, linked to an organizational mission
The following are the primary problems and the causes why merit pays do not serve effectively at time
When merit raises become an annual affair with no linkage between performance and pay raise, merit paygets to be seen as an entitlement , failing to offer the necessary motive
When they are given out of seniority and favoritism to particular employees, the linkage between performance and pay is broken
When the raise offered is insignificant , it fails to provide sufficient level of motivation
When merit raises are seen as raises given for accommodating rises in rents, expenses etc
When employees lack trust in management
When performance setting, measurement and linkages between performance & pay are not clear
Employees do not value only money. Every employee has different needs may it be work-life balance, health, time etc. So, mere pay increase may not be helpful
The causes mentioned above can be addressed through various approaches.
First there should be clear linkage between performance and pay raise. The performance criteria used must be clear. Objective and measurable.
There should be difference between pay raise given for accommodating inflation / expenses and merit pay
The pay raise must be significant and fair enough. A lump some amount can be offered at the time of annual reviews differentiating them form increase in base pay
The performance appraisal system should be reliable and valid
 
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