What Is a Merit Increment? And Tips on How to Attain It

By Indeed Editorial Team

Published 30 March 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Knowing what a merit increment is may be helpful for professionals who want to increase their salaries. Provided by companies to reward good performance, in addition to regular year-end pay raises and bonuses, a merit increment is a way for professionals to feel appreciated for the work they put in, so companies can retain their talents. To achieve a merit increment, it's critical to understand what it is and the motivations behind it. In this article, we define a merit increment and provide tips for achieving it.

Related: Types of Bonuses: Definition and How To Get One

What is a merit increment?

A merit increment is an increase in salary as a result of good quality work. Companies usually introduce it to reward good performance at work.

A merit increment is different from a performance bonus, even though both aim to remunerate employees for their outstanding performance. While a merit increment applies to the salary that follows professionals throughout their time in the company, a performance bonus is a one-time additional payment to team members, which does not affect their base salary. A merit increment also differs from a regular pay raise, usually implemented at a yearly interval, as the latter is mainly based on a company's overall profitability and distributed throughout the company, according to how long each professional has been with the company.

Related: What Is a Performance Bonus? Benefits, Types and Components

Advantages of a merit increment policy

Companies may introduce merit increment policies to motivate professionals to work harder. In turn, these working professionals may feel appreciated for all their hard work. Here are some benefits of a merit increment policy you might experience if the company you work for uses one:

Aligns individual goals with the company's objectives

With a monetary reward for good performance, it incentivises working professionals to perform well above average. This provides them with an opportunity to clarify the steps to achieve this with the company.

If you have a clear idea of the company's overall target and a good understanding of your personal contribution to the company's success and profitability, it may make your work more fulfilling.

Improves personal overall productivity

When your personal goals align with the company you work for's mission, you may become motivated to work harder, which can increase your personal productivity. Also, having a merit increment policy in place allows you to track your performance at regular intervals. Equipped with this information, working professionals are better able to monitor their own performance regularly, understand their productivity gaps and keep their overall productivity high.

Promotes a positive culture of meritocracy and appreciation

The recognition of good performance instils a culture of meritocracy, where working professionals feel appreciated for the hard work they put in, instead of receiving the same yearly increment as those who have been putting in an average performance year on year. It also builds a culture of mutual appreciation, where the company appreciates their hard work by rewarding them with a merit increment and they return the appreciation with their contribution to the company's overall productivity. Such culture not only makes the top performers feel valued but also motivates average performers to do better.

Encourages healthy competition among peers

Knowing that a merit increment may occur at the end of each project or each year helps to keep professionals motivated. As they work hard towards the incentive, the work energy may motivate others to work harder. The collective effort and camaraderie are more pronounced when working towards a team goal. When colleagues display strong ambition and work ethic to achieve the goals, it stimulates one's effort to do the same.

Facilitates continuous career progression

A merit increment is essentially an extrinsic motivation not just for working professionals to put in the extra effort to meet company goals, it also makes them think twice about leaving a workplace where there is a monetary reward for their efforts, beyond their basic salary. A positive, goal-driven culture that makes them feel appreciated may also be a strong retention factor for them. This allows them to focus on their career progression within the company, instead of having to consider a career move and start all over in another company to advance their career.

Related: Extrinsic Motivation Examples (Definition and Importance)

Essential components of a merit increment policy

After understanding the benefits of a merit increment, it's important for working professionals to know what to expect within a merit increment policy to reap the advantages of it. While the policy can vary depending on the company, it's important for organisations to issue a merit increment fairly and clearly. Here are a few important components that most merit increment policies include:

1. S.M.A.R.T. goals

For any professional to work towards the aligned goals effectively, it's important for them to first understand what these goals are and how to reach them. Therefore, the policy typically contains goals that are specific, measurable, achievable, relevant and time-bound. With a clear understanding of how to achieve the goals, it makes team members believe they can fulfil these goals progressively, thereby significantly increasing their likelihood of realising them.

If you're reviewing a merit increment policy and you're unclear what your specific goals are, consider contacting your manager to ask them for more details. You may also schedule a time to create your own personal goals that can help you achieve the company's objectives or targets. For example, if the company wants to increase sales, and one of the goals for team members is to increase their personal sales by 10%, you might set an individual goal to call five additional people each day. This action can help you achieve more sales for the company.

2. Metrics for awarding the merit increment

Depending on the company's budget, the merit increment may not extend to everyone who completes their goals, but only top performers who may have exceeded their goals by far. In that case, it helps to define the metrics for awarding the merit increment within the merit increment policy, so that working professionals can better understand the selection process, criteria and the amount, avoiding any ill feelings if they weren't able to receive a merit increment, despite putting in substantial effort into their work. This also ensures fairness in the selection process and avoids animosity among colleagues.

While it's a company's responsibility to ensure their merit increment policy is clearly communicated to all, working professionals can expect the above-mentioned information from the policy, so that they're able to work towards accomplishing their goals more effectively and efficiently. If you're reviewing a policy and are unsure of the increments, consider asking your manager for more information.

Related: Your Guide to Merit Increases at Work

Tips to attain a merit increment

For individuals looking to receive a merit increment, here are the steps you can follow to greatly increase your chances:

  • You can start by aligning your personal goals with the company's targets. While the company benefits from having a merit increment policy through the alignment of personal and company's goals, employees can only work towards attaining a merit increment when they have a clear idea of what these goals are and how they contribute to the bigger picture. Take the initiative to clarify what these goals are to ensure you're moving in the right direction.

  • You can fulfil these goals not just by working hard but also by working smart. Although staying focused on your goals is important to achieving them, exploring strategies to improve your efficiency allows you to complete them in a shorter period. For example, some may work with more energy after having coffee in the morning, while others may be more productive at night, and it's important to find the time that works best for you.

  • You can keep track of your performance. Note down your contribution to the completed projects and tasks, which can come in handy as you sit down for your performance review with your manager. These details also allow you to discover any skills gap or room for improvement in your work.

  • You can establish an open communication channel with your reporting officer. Openly expressing to your reporting officer your desire to work towards obtaining the merit increment can show that you're taking ownership of your work. It also offers your reporting officer the opportunity to share with you the gaps to fill in your performance before qualifying for the merit increment.

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