Merit Pay Doesn’t Work
I have written multiple times about he ever hated performance review. This dreaded ritual in many companies is also often tied to the annual salary increase. An increase that often times is given within a tight budget constraint somewhere between 2-4%. It also often called a merit increase or a pay for performance compensation system. Those who are top performers may get a 4% increase while the poor performer may get the 2-3% increase. The result of this system actual keeps employees at very close salaries. And my guess is that if the top performer in a particular position or team has a little less tenure than the bottom performer, the bottom performer could still make more money.