Management Glossary

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merit pay
The practice of setting an employee's salary and bonuses and future salary increases based on the employee's performance rather than on a factor that is not performanced-based such as seniority. The term merit pay may also refer to not the practice of basing pay on merit, but rather to one component of of a pay package. For example, an employee's earnings may include a component that is common to all employees who share his or her job classification, another component recognizing seniority and a third component representing merit pay that is determined based on job performance.
Contributed by: ManagerWise Staff
See: merit increase

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