Linking Merit Pay with Competitive Strategy by Dr. G C Mohanta

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Linking Merit Pay with Competitive Strategy

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Linking Merit Pay with Competitive Strategy by Dr. G C Mohanta

  1. 1. Linking Merit Pay with Competitive Strategy Dr. G C Mohanta, BE, MSc(Engg), MBA, PhD(Mgt) Professor Al-Qurmoshi Institute of Business Management Hyderabad 1
  2. 2. Merit Pay Merit pay is the increase in pay based on goals or achievements set by an employer, rather than a pay rate based on a union contract or a defined pay scale for a position. It is also known as pay for performance. Merit pay typically involves the supervisor meeting with the employee to discuss the employee's work and to award an increase or a bonus based on performance. 2
  3. 3. Who participates in Merit Pay Programs? Merit pay program most often is introduced in private sector ‘for profit’ of the economy, rather than in public sector organisation 3
  4. 4. Elements of Merit Pay Managers rely on objective as well as subjective performance indicators to determine whether an employee will receive a merit increase and the amount of increase warranted Employees must know that their efforts in meeting production quotas or quality standards will lead to pay raises 4
  5. 5. Elements of Merit Pay (Contd.) Companies those use merit programs, must ensure that the funds needed to fulfil these promises to compensate employees, are available Organisations should make adjustments to base pay according to changes in the cost of living or inflation before awarding merit pay raise Effective performance appraisals can ensure effective merit pay programs. 5
  6. 6. Elements of Merit Pay (Contd.) Companies those use merit programs, must ensure that the funds needed to fulfil these promises to compensate employees, are available Organisations should make adjustments to base pay according to changes in the cost of living or inflation before awarding merit pay raise Effective performance appraisals can ensure effective merit pay programs. 5

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