To work well, a merit pay plan should create a belief among employees that the way to achieve high pay is to perform at high levels.

Merit Pay Plan

A compensation strategy that awards pay increases or bonuses based on an employee's performance, accomplishments, or achievements.

High Pay

A level of remuneration that is significantly above the average or expected salary for a job or position.

Perform

To carry out, execute, or conduct (an action or task).