Merit-Pay Payoff? by ProQuest


Human resources executives help manage the $4.5 trillion that US corporations are spending on wages and salaries in 2008 and determine how to distribute the $200 billion increase in wage and salary spending for 2009. Most of this increase will take the form of merit pay, the nearly universal method for distributing wage and salary raises across the US and, increasingly, around the world. The seemingly self-evident premise underlying merit pay and other individual performance-based pay plans is that they produce higher employee and organizational performance. Most companies, however, do not test the actual impact of performance-based rewards on employee behaviors and financial results. Survey reports show years of flat merit increase budgets that barely meet inflation rates and bear no relationship to productivity growth or profitability trends. Emilio Castilla, assistant professor at MIT's Sloan School of Management and a visiting professor at New York University, advises HR executives to pursue collaboration with academic researchers.

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