Let’s understand what merit pay means. Merit pay, also known as performance-based pay, is an incentive awarded to employees as a pay rise, promotion, or bonus whenever they manifest splendid performance at work. It is provided to employees that meet the criteria established by the employer. Usually, merit pay is observed in the sales team, where salespeople are furnished with a bonus for performing well or accomplishing a target.
The company institutes criteria to assess the performance of an employee in a given time period. HR managers evaluate the progress of employees, have frequent check-ins with them, and deliver feedback.