Merit pay is defined as:

Merit pay is specifically tied to an individual's performance rather than their tenure, a flat increase, or team achievements. It serves as a financial incentive to motivate employees to perform at their best by recognizing and rewarding their contributions and efforts in the workplace. Organizations utilize merit pay to differentiate pay among employees based on their productivity, quality of work, and overall performance metrics. This approach encourages a culture of accountability and ensures that high-performing individuals feel valued for their unique contributions, fostering a more productive environment.

The other options do not reflect the essence of merit pay: tenure-based increases reward loyalty rather than performance, flat salary increases do not consider individual contributions, and bonuses for team achievements emphasize collective success, which differs fundamentally from merit pay that focuses on personal performance.