THE CONCEPT OF A MERIT PAY SYSTEM Introduction B

One of the most effective approaches to human resource management is the development of ties between performance and reward. The key to motivating an individual to remain in and perform well in an organization lies not in urging an individual to remain or perform, but, rather, in the developing within that individual a strong commitment to the organization. From such a commitment will flow the desire to remain in and perform well in an organization. Organizational commitment is manifested as a strong desire to remain as a member of a specific organization, willingness on the part of an individual to exert high levels of effort for a specific organization, and belief in and acceptance of organizational values and goals by an individual.

With respect to organizational commitment, organizations and their employees are in an exchange relationship. In such a relationship, each party makes demands on the other, and each party provides something to the other in return. Thus, employees exchange their performance for organizational reward within an institutional structure.

There are several types of reward; however, compensation is usually conside

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ds have been found to be effective in the motivation of workers to perform better, and that rewards enable organizations to attract more talented individuals. The author, however, also draws attention to one of the structural problems of merit pay system. This problem is the choice frequently encountered by employers between overpaying moderate workers or continually reducing the salary of such workers to reflect performance deterioration. A failure to adjust merit pay schemes according to performance causes an organization to risk the loss of potentially talented workers. The contributive value of this article lies in the identification of a significant problem associated with the continued functioning of a merit pay system. Employers must understand that a merit pay system cannot be simply designed, implemented, and left to function on it own. Hill, R. Bradley. (1992, Winter). Base salary increases and merit bonuses: An approach to annual compensation increases. Compensation and Benefits Management, 9(1), 29-33. The author of this article considers two approaches to merit compensation increases--bonuses and adjustments to base salaries. Both approaches are widely used in merit pay systems. The author of this article s
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Approximate Word count = 2231
Approximate Pages = 9 (250 words per page)

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