Merit pay refers to the awarding of differential amounts
of financial rewards to deserving employees based on their
individual performances as measured by Performance appraisal
and Rating. The idea is that such a practice would act as a
spur to all employees -- both deserving and undeserving-- to
improve their productivity to earn the extra pay. The
systemic effect would be enhanced organizational productivity
and effectiveness. Although it has fallen in and out of favor
over the years, as its long history in the public sector
shows, interest in the concept endures. So has the
controversy surrounding its efficacy or the lack thereof.
This dissertation is an attempt to further our
understanding of the potential of merit pay in the public
sector. To this end, it makes a critical assessment of the
efficacy or the lack thereof of merit pay programs in the
public sector. This has been done by integrating the findings
of thirty-six empirical studies that examined such programs.
Twenty-nine of these studies elicited from employees their perceptions
affected
of how merit pay in their organizations has
employee motivation, productivity, and
organizational effectiveness. The remaining seven represent
authors' (non-respondent) conclusions regarding the effect of
merit pay on the above variables in the organizations they
examined.
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