The merit pay strategy rewards the organizational employees for attaining well defined criteria of performance (Martocchio, 2014). If the employees do not meet the performance criteria, they are not rewarded. This remuneration strategy is based on the believe that the rewards will motivate the workers to work hard and contribute to high organizational performance. However, this strategy neglects the negative impact of the merit pay on employee motivation. Merit pay grids can undermine the employee motivation.
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Different workers have different capabilities and work in different departments that produce services and goods of different values. Some employees who work on undervalued but important departments of an organization may feel undermined and this may affect their self-esteem, making them frustrated. When such employees feel their efforts are unappreciated, owing to the fact that the organizational management offer less consideration to their services, they lose motivation to work.
The use of merit pay grids gives the perception of an organization that values its financial targets over the employee interest. The process of measuring employee output through their ability to meet the pre-determined performance targets creates the notion of more emphasis on organizational goals over employee relationships. Therefore, employees may feel that they are only relevant to the organization as long as they meet the targets. This may have negative impact on employee motivation, who view themselves as means through which organization attains its goals. Indeed, although merit pay offers positives like increased performance, it has inherent negative impact on employee motivation.
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