Healthcare and Medicine Reference
poor morale” (p. 11). Clive (2004) says that when standard salary increases
are given that do not factor in merit, “The message to the outstanding
performers is that their efforts are not valued and they should either
perform at an 'average' level or find an employer who is willing to pay
for their skills” (p. 2), while the message to marginal workers “is that their
performance is acceptable and no significant increase in performance is
required” (p. 2).
There is evidence that merit pay has a positive impact on worker per-
formance. Dee and Keys (2004) report that
Despite widespread pessimism among educators about whether merit pay
systems can effectively reward good teachers, most of the limited empirical
evidence has been surprisingly positive. For example, two studies (in 1992 and
1997) found that the math and reading test scores of students in South
Carolina improved significantly when the students were taught by teachers
receiving merit pay. Similarly, related and more recent literature suggests that
mathematics students learn more when their teachers have certification in
The Center for the Study of Social Policy (2002) reports that, in orga-
nizations using competency-based measurement tools to evaluate workers'
performance, satisfaction of workers with the system was 97% while
dissatisfaction with the old system of evaluating performance was 93%.
The new system linked performance to pay while the old system gave
everyone the same increase regardless of their performance.
Setting Up a Merit Pay System
In a merit system, the total amount available for raises is placed in a merit
pool. Below you will see how points are given. Let's say the pool is 3% of
the agency's budget for salaries for the year, or $100,000. Rather than
giving the 3% out to everyone, based on their salaries and regardless of
their performance, merit pay is based on each worker's individual perfor-
mance across several indicators. I'm using the following as an example.
(1) Client improvement is worth up to 14 points while good agency citi-
zenship is worth up to 6 points. A perfect score would be 20. The points
are totaled and then each point is given a dollar worth. Let's say that there
are 500 points given out and that each point is worth $200. This is
accomplished by dividing the total points (500) into the merit pool
($100,000). The worker who scores 20 points on their evaluation would
get a raise of $4,000 while the worker who scores 5 points would get an
increase of $1,000. This is irrespective of their salary. For a salary of
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