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Merit Pay Grids: Employee Motivation

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What is your reaction to the following statement?

Merit pay grids have the potential to undermine employee motivation.

Please discuss your views and support them with evidence.
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Solution Summary

This solution discusses a potential interpretation of the statement, "merit pay grids have the potential to undermine employee motivation".

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Question: React to the statement: Merit pay grids have the potential to undermine employee motivation. Please discuss your views.

I concur with the statement that merit pay grids can potentially affect employee motivation if there are issues with the design and implementation of the plan. Despite research studies (Heneman, 2002) which provide empirical evidence that merit pay plans have a positive impact on employee motivation, performance and productivity, studies conducted by Terpstra & Honoree (2008) indicate merit pay plans may cause organizational problems such as feelings of inequity and unfairness among employees. Invariably, this potentially could impact ...

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