Merit Rating | Meaning, Objectives, Merits, Dangers, Uses, Suggestions


Job evaluation in a firm aims in measuring only the relative worth of jobs or positions. In other words, the technique does nothing to ascertain the actual performance of the persons occupying such positions. This factor is a serious limitation to the techniques because employees are not equal in their skill, efficiency, attitude and loyalty.

Some individuals by their skill and efficiency can do the job better than their colleagues who are placed in the same cadre. Such persons should be suitably rewarded for their exceptional qualities. Besides, the employees too would like to know whether they are able to reach the desired level of performance.

For these reasons, it becomes necessary for the management to provide some machinery or device by which the actual performance of the employees can be measured. Merit rating provides the answer to this question.

Merit Rating
Merit Rating – Meaning, Objectives, Merits, Dangers, Uses, Suggestions

Meaning and Definition of Merit Rating

Merit rating is concerned with measuring and evaluating employee performance after he is placed on a job.

The various definitions formulated by efficient scholars are given below:

Definition of Edwin B. Filippo

Merit rating is systematic, periodic and so far as humanly possible, an impartial rating of an employee’s excellence in matters pertaining to his present job and to his potentialities for a better job.

Definition of John A. Shubin:

Merit rating is a systematic appraisal of the employee’s personality and performance on the job and is designed to determine his contribution and relative worth to the firm.

From these definitions, it is clear that merit rating is concerned with the evaluation of the performance of the employees on particular jobs.

The performance factors usually considered are personal factors like quality of work, capacity to learn, co-operation and initiative. The number and type of factors to be considered are generally selected by a committee consisting of experts.

The personnel appraisal is usually made by the supervisors or others who are familiar with the performance of the workers. Such appraisals usually involve the use of forms and procedures that have been developed for the purpose. Such records are highly useful for personnel actions like promotions, transfers, etc. Since this system is mainly concerned with the performance of employees, it is also known as personnel appraisal, performance appraisal and employee appraisal.

Distinction between Merit Rating and Job Evaluation

Merit rating is quite different from job evaluation. The points of distinction between them can be listed as follows:

Job Evaluation Merit Ratings
1. It rates the occupation to determine job differentials. It gauges employee performance to determine his relative contribution to the job.
2. The object of it is to fix a fair base wage rate. Its object is to decide on any differential pay over and above the base wage.
3. It is not concerned with the promotion and transfer of employees. It forms the basis for promotion and transfer of employees.

Objectives of Merit Rating

Merit rating, apart from the primary objective of appraising the employee’s performance, has certain well-defined objectives. Merit rating may be employed:

1. To serve as a basis for pay adjustments when the job rate is not fixed.

2. To serve as a basic for special rewards such as a share in profit and periodic bonuses.

3. To determine qualifications for the assignment of work.

4. To determine the promotional qualifications.

5. To remove the unfits and misfits.

6. To determine who should be retained when work is slack.

7. To select candidates for special training.

8. To assist in the development of employees by finding out their talents and weaknesses.

Factors to be considered in a Merit Rating System

All merit rating systems require separate appraisal of several factors. It means to determine how much of the qualities essential to do a job is present in the person performing the job. The important factors that are generally considered are given below:

1. Knowledge of the job by virtue of educational attainment, special training, experience etc.

2. Performance regarding output, workmanship and consistency.

3. Co-operation revealed in attitudes, adaptability to changes, readiness to follow instructions and helpfulness to associates.

4. Leadership revealed by the ability to influence others and to direct their work.

5. Stability revealed by attendance, punctuality and length of service.

6. Character revealing integrity, dependability, persistence, confidence and courage.

Procedure for Designing a Merit Rating Programme

A typical Merit rating system involves the following steps.

1. Determine the employee groups to be covered and the purpose of performance rating.

2. Set up a training method by selecting and defining performance traits to be appraised and preparing a rating scale.

3. Select and train raters.

4. Check and interpret performance scores and use the information for granting individual wage advances, employee counseling, training and the like.

Merits of Merit Rating

The following are the merits of merit rating:

1. Better Employee Relations

Merit rating promotes a healthy and tension free employer and employee relationship. A systematic merit rating system enables the management to understand the employees better. A better understanding of the employee in turn shall enable the employer to win their confidence and faith.

2. Record of Performance

It is also possible to maintain a complete and up-to-date record of the quantity and quality of output as also of abilities and skills acquired by each individual employee.

3. Discovery of Exceptional Talents

Merit Rating helps in identifying exceptionally competent and talented persons. In the course of time, such persons can be promoted to key jobs and thereby they can be rewarded properly.

Dangers of Merit Rating

The following are the dangers of merit rating against which proper care should be taken:

1. Personal Bias of the Rater

The personal bias of the rater itself is a danger. In order to avoid such danger, the rating must be reviewed by superiors and compared with previous rating.

2. Unsatisfactory Forms

The forms used for rating shall also be unsatisfactory, if proper care is not taken in designing the forms. The forms should be attractively printed so that the rater shall take proper care and attention in filling the forms.

3. Frequency

When the rater rates too frequently, inaccurate results are bound to arise.

4. Secrecy

Each employee is rated secretly. But each employee who is rated must have a free discussion on his rating. Unless such discussions take place, there will be distrust between workmen and the management.