Merit increases reward high performance with targeted pay raises. Learn how to implement them effectively with data-driven tools from Performance Scoring.
Raises aren’t all created equal. While across-the-board pay bumps may seem fair, they often fail to inspire lasting performance improvements.
A merit increase is different. It’s a targeted salary adjustment given to employees who consistently deliver high-value results, based on clear performance criteria.
Why Merit Increases Work
By tying compensation directly to performance, you reinforce the behaviors and outcomes that matter most to your business. Research from SHRM shows that merit-based pay can improve retention and boost engagement by clearly connecting effort to reward (source).
How Merit Increases Differ from Other Pay Raises
- Cost-of-Living Adjustments (COLAs) keep wages aligned with inflation but aren’t tied to performance.
- Annual Salary Adjustments reward tenure rather than contribution.
- Bonuses are one-time incentives, not ongoing recognition.
- Skill-Based Increases reward new capabilities, not necessarily results.
Merit increases stand apart by rewarding consistent, measurable performance.
Implementing Merit Increases the Right Way
- Set Clear Performance Metrics: Define what “high performance” means for each role. Performance Scoring’s role goal tracking ensures criteria are specific and measurable.
- Track Data Continuously: Avoid relying on memory during review season. Our ScoreCards and ScoreBoards give a real-time picture of individual and team performance.
- Integrate Feedback and Reviews: Use coaching modules and performance reviews to ensure decisions are grounded in documented evidence, not bias.
- Communicate the Why: Be transparent about how increases are determined. Employees are more motivated when they understand the path to higher pay.
- Review Annually—But Measure Year-Round: A single yearly conversation isn’t enough. Performance Scoring’s meeting management tools keep performance discussions ongoing.
The Payoff for Businesses
Merit increases send a clear message: exceptional contributions are noticed and rewarded. This approach can help you retain top performers, reduce turnover costs, and create a culture of accountability and excellence.
Turn Performance into Pay—Fairly and Effectively
Merit increases are only as good as the system that supports them. With Performance Scoring, you can ensure every pay decision is backed by transparent, accurate performance data.
Book a demo to see how we help you reward the right way.
