In today’s competitive business landscape, organizations are constantly exploring ways to motivate and retain top talent. One approach gaining popularity is the implementation of a merit-based salary system. This system rewards employees based on their performance and contributions to the organization. While there are numerous benefits associated with such a system, there are also inherent challenges that need to be considered. This article will delve into the benefits and challenges of implementing a merit-based salary system, providing insights into its potential impact on organizations.