External and internal equity.

Implementing pay for performance plans, good management, and incentive plans will motivate personnel to perform at the peak levels necessary to bring about improvement in the bottom line which is what interests most corporations. Merit pay systems which are based on past performance are flawed by their very nature and do not work effectively as a reward system. These systems provide a supervisor with a means of escape from the proper practice of their authorities, …

…employee and supervisor come to agreement over each score and discuss any variances. Once the final score is determined, a mathematical equation is established. From that equation is the result in a percentage that is applied to the employees' base salary. The percentages usually range any where from one to ten percent. Many times, if one is given a bonus for a job well done, the money is not the motivator, but the recognition is.