Pay for performance, also referred to as merit pay, is a compensation system that rewards employees relative to their job performance. When meeting or exceeding goals, individuals receive greater compensation compared to if they fall short of targets.
Advocates of PFP believe that compensation is a motivator and that greater quality and quantity of work can be incentivized by rewarding employees accordingly. Employees whose work does not meet goals may be incentivized to seek relevant training to strengthen skills or pursue a different role that is a better fit. Proponents believe PFP can lead to fairer compensation, strengthen the organization and boost morale.
Opponents criticize PFP of evaluating complex jobs with simplistic measures, possibly undermining quality, productivity and engagement. An often-cited concern is the potentially subjective judgement of employee performance and the challenge of applying the PFP plan to roles more cognitive in nature versus those that are mostly mechanical
WMU ScholarWorks Citation
Longjohn, David, "Pay for Performance and Motivating Professional Development" (2019). Academic Leadership Academy. 108.