A pay increase awarded to employees based on their individual performance.
Merit pay (also called merit increase or performance-based pay increase) is a permanent increase to an employee's base salary awarded in recognition of strong individual performance. Unlike a bonus (which is a one-off payment), merit pay increases the employee's ongoing salary level. Merit increases are typically awarded during annual pay reviews and determined by performance appraisal ratings. A well-designed merit pay programme rewards high performers, motivates the workforce, and manages payroll costs within budget.
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