After reading this article you will learn about:- 1. Definition of Merit Rating 2. Objectives of Merit Rating 3. Methods 4. Advantages 5. Disadvantages.

Definition of Merit Rating:

Merit Rating assesses the merit of the person doing the job. Merit rating determines the extent to which an employee meets job requirements. Job evaluation and Merit Rating are two complementary aspects of a sound personnel policy.

The first, determines a suitable wage structure for the job and the second (i.e., merit rating), decides the rewards an employee should get in addition to his wages, depending upon his merits.

Merit Rating is a systematic and orderly approach to assess the relative worth of an employee working in an organisation in terms of his job performance, integrity, leadership, intelligence, behaviour, etc.


Merit rating is commonly referred to as Employee Rating, Employee Appraisal or Staff Reporting.

Objectives of Merit Rating:

(1) Merit rating provides a record of the worth of employees; they, therefore, can be put on the most appropriate jobs depending upon their capabilities.

(2) Merit rating unfolds the limitations of an employee and thus helps in employee improvement.

(3) Merit rating records form a basis for:


(a) Wage-increase,

(b) Promotion,

(c) Special assignments,

(d) Training,


(e) Transfer, and

(f) Discharge.

Methods of Merit Rating:

The different methods of merit rating, merit rating plans or merit rating systems are discussed below:

1. Rating Scale Method:


The steps involved in Rating Scale method are:

(a) Define the merit factors (i.e., standards) to rate the employees.

The different factors, according to the nature of job may be as follows:

i. Standard of output,


ii. Quantity of output,

iii. Intelligence,

iv. Job knowledge,

v. Leadership,


vi. Integrity,

vii. Dependability,

viii. Education and experience,

ix. Efforts and initiative,


x. Adaptability,

xi. Co-operation,

xii. Judgment,

xiii. Character,

xiv. Loyalty, and

xv. Health and appearance.


The number of factors employed for rating an employee may vary from six to ten.

(b) Divide each factor into three to five different grades or degrees like Excellent, Very good, Good, Fair and Unsatisfactory.

(c) Impart certain points (marks) to each grade.

(d) The worth of an employee can be determined from the total points he gets for all his merit factors. On the basis of these points different workers can also be compared.

2. Check List Method:

The method employs a list of questions and several statements which are concerned with the employee performance on various aspects of the job and which are considered important for evaluating the merit of an employee for that job. The questions are of Yes or No type. Each question or statement possesses certain points which when totaled together for all the relevant questions indicate the rating of an employee.



(i) It is a good method of merit rating.

(ii) It reduces Halo-Effect.


It is time consuming and very difficult to construct statements and prepare appro­priate questions.

3. Employee Comparison Method:


The method compares a worker on a job with all other workers on the same job, in pairs. Suppose there are four workers namely W, X, Y and Z.


W is compared with X and suppose

W is better W is compared with Y and suppose Y is better

W is compared with Z and suppose W is better Next,

X is compared with Y and suppose Y is better


X is compared with Z and suppose Z is better

Y is compared with Z and suppose Y is better

The summary of the results shows that

W turned out to be better – 2 times

X turned out to be better – Nil.

Y turned out to be better – 3 times (maximum) and


Z turned out to be better – 1 time.

Therefore, the worker Y is taken to be the best worker.

This method consumes much time especially when the number of employees to be compared is large.

Advantages of Merit Rating:

Besides a few mentioned under objectives, other advantages of Merit Rating are as listed below:

(1) Merit rating develops the ability of a rater,

(2) Meritorious employees are encouraged,

(3) Employee-employer relations improve.

(4) It is easy to deal with the unions as merit rating is a systematic method to rate the employees.

(5) It involves lesser calculations as compared to other incentive schemes.

Disadvantages of Merit Rating:

(i) It entails Halo Effect. Halo effect means the tendency of the rater to rate an employee consistently low, average or high in all jobs, simply basing upon the general impression formed by him about the employee.

(ii) Correct results will not be obtained, if merit factors relevant to a particular job are, somehow or other omitted or points allocated to them are not fair.

(iii) A rater may play safe and tend to impart average grade to an employee who otherwise deserves unsatisfactory rating.

(iv) A rater, if he does not make enough personal contacts with each employee cannot rate them correctly.

(v) A rater (i.e., supervisor) may not like to degrade his subordinates who maybe excellent otherwise but not good at work.

(vi) Merit rating does not reward employees immediately for their performance.