Merit Increase
A salary increase awarded to an employee based on their individual performance, as assessed through performance reviews or manager recommendation.
A merit increase is a pay rise given in recognition of an employee's performance — distinct from a cost-of-living adjustment (which keeps pay level with inflation) or a promotion increase (which reflects a change in role). Merit increases are typically determined during annual or biannual performance review cycles and are expressed as a percentage of base salary.
The credibility of merit-based pay depends entirely on the quality of the performance management system underpinning it. Where performance ratings are inconsistently applied, biased, or lack transparency, merit increases can feel arbitrary and reinforce inequities rather than rewarding genuine contribution.
For remote organisations, ensuring consistency in merit decisions across locations and cultures requires structured criteria, calibration sessions where managers align on ratings, and clear communication about how increases are determined. Pay transparency practices — such as publishing salary bands and merit increase ranges — build trust in the system.