Merit pay is a permanent increase in employee salaries based on the differences in job

performance. And, performance appraisals is an annual evaluation system that measure the
employee performance, growth, and the overall contribution to the company. A company can
design their merit pay program by linking the performance appraisals, but if the employee
didn’t recognize or understand the link between their performance appraisals and the Merit
pay increase amount, the whole pay program will fail. To make the Merit pay program effective,
an identification of the desire goals and objectives that the employee should reach or achieve in
their job performance is a must. Also, these goals and objectives should be realistic and
achievable.

Pay for knowledge plan, generally, encourage employee to learn. It rewards professional,
service, and managerial workers for learning specific curricula depending on the depth, range
and the type of knowledge they are able to use and apply in their job. In order to make a
successful pay for knowledge pay system, training should be mandatory and not an option.
Therefore, creating and designing a suitable training program, which is aiming to prepare
employee for developing the company and using the latest technology by learning new skills
and knowledge that will be required to perform their job, is necessary to make a successful Pay
for knowledge program. And, in return for this learning effort, the employee pay will be
increased.