Seniority-based pay systems are those in which the primary basis for pay increases is the employee’s tenure. … Some benefits of seniority-based pay include loyalty, retention, and stability of all staff members, regardless of performance levels

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. This usually involves the employer conducting a review meeting with the employee to discuss the employee’s work performance during a certain time period

 

.Merit pay plans may create problems in employee relationships, problems in morale related to jealousy, fear, favoritism, undesirable competition, and job insecurity. Merit programs tend to develop divisive and competitive attitudes rather than cooperation among employees.