The Negatives of Merit Pay
Though, in theory, merit pay sounds like a good idea, it can cause harm to productivity and performance within the work environment.
October 18, 2021
Merit pay, incentive programs, pay-by-commission—these all might sound like great ideas. The more work that someone does, and the better they do that work, the more money they will earn. This extra money will incentivize employees to work harder and be more productive.
Sadly, these claims are false, as incentive programs cause more harm than good. The core fault of merit pay is the disconnect between results and reward. Money, quite sadly, is not the solution to all problems; for unquantifiable and creative jobs, rewards and incentives may even damage the final outcome.
For jobs that involve creative tasks or are unmeasurable by metrics, money is not the only factor that leads to increased productivity for these types of jobs.
Other factors that influence their performance are not included in the philosophy of merit pay, such as maintaining a supportive work environment or giving employees adequate rest.
Another issue with incentive pay for nonquantitative jobs is the performance metrics used. Metrics for measuring performance at a job are subjective—there is no completely unbiased measurement for how creative an artist is or how productive an employee is. Having biased review sources discourages employees from doing their best, rather focusing on appeasing qualities the reviewer looks for. Take the example of teachers—all of mine have been subject to reviews or being observed by an administrator. Following such reviews, normally laid-back teachers have sometimes suddenly transformed into nervous monsters that demanded absolute control of the class. To me and my fourth-grade classmates, it was sadly hilarious seeing the difference in personality as our teacher became more and more nervous. In retrospect, my teacher’s nervousness was simply a reflection of the expectations that emerged from performance reviews.
Like performance reviews, incentive programs are similarly controlling. Incentive programs are akin to blackmail: the “do this, get that” mentalities in both are equivalent. This controlling nature and disconnect between action and reward ironically cause worse performance in incentive programs.
Constantly dangling employees’ pay and bonuses in front of them is pointless and detrimental. More importantly, it robs employees of their dignity. Incentives are already a part of many jobs; in the case of teachers, seeing students thrive and grow is enough incentive. A salesman is incentivized by seeing his hard work reflecting in the growth of his business. Employees should come to work, not because of money, but because they see their work reflecting in the growth of their company.