When a company replaces uniform pay increases with merit pay plans and incentives for groups and individuals, what can it expect?

• A. Increased motivation and greater productivity
• B. Decreased morale
• C. Higher costs with no benefits
• D. Legal issues with unions

Answer: (A)

Tying compensation to performance through merit pay and incentives creates a direct link between effort and reward. When employees know that higher performance can raise their pay, they’re more motivated to improve, develop skills, and stay focused on goals. Group incentives encourage teamwork toward shared targets, while individual incentives reward personal achievement, which together tends to boost productivity. Uniform across-the-board raises remove that performance link, so motivation can lag. Overall, you can expect increased motivation and greater productivity.