Merit pay or merit raise is any salary increase the firm awards to an individual employee based on his of her individual performance. It is different from a bonus in that it usually becomes part of the employee’s base salary, whereas a bonus is a one-time payment. Although the term merit pay can apply to the incentive raises given to any employee—exempt or nonexempt, office or factory, management or non-management– the term is more often used for while collar employees and particularly professional, office, and clerical employees.
Definition