If Jessica can get a 4.0 on her performance appraisal this year, she will earn $1,000. Jessica is…

➤ How does merit pay differ from profit sharing and gainsharing?
Merit pay ties rewards to an individual’s appraisal and focuses on personal contribution. Profit sharing distributes a portion of overall company profits to employees based on organizational performance. Gainsharing links pay to measurable productivity or cost-saving improvements at the team or unit level. Each system balances individual versus collective incentives.