What does the merit pay plan base salary increases on?

The merit pay plan is designed to reward employees based on the quality of their performance. This approach aims to align compensation with individual contributions to the organization, encouraging employees to perform at their best. By basing salary increases on performance quality, such a system motivates employees to enhance their productivity and improve job effectiveness, reflecting their hard work and success.

While factors like years of service, overall company performance, and job workload can influence employee compensation decisions, the key characteristic of a merit pay plan is that it specifically ties salary increases to how well an employee meets or exceeds performance expectations. This creates a direct correlation between effort, achievements, and rewards, promoting a performance-driven culture within the organization.