Merit pay, also known as pay-for-performance, is defined as a raise in pay based on a set of criteria set by the employer. The procedure for granting merit pay usually consists of conducting a review meeting with the employee to discuss the employee's work performance during a certain time period. Merit pay is a matter negotiated between an employer and an employee (or the employee's representative).
Merit pay is not mandated under state or federal laws, such as the Fair Labor Standards Act (FLSA), which does not require or address the issue of merit pay.
