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Meaning & Definition

Merit Pay

Merit pay is a system,where one is paid on the basis of the achievement of targets by an individual. These are done on a metric basis where the individuals are evaluated on the targets and levels achieved in the metric and are paid or compensated accordingly.

For example, suppose there is a company which has salesmen and the salesmen are to be rewarded on a merit pay basis. The appropriate metric for the salesmen’s compensation will be the number of sales done in a particular period, and an appropriate percentage of each sale is given to them as commission.

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