Advantages of Merit Based Promotion 

No Favoritism: 

A seniority-based promotion structure can eliminate the perception of favoritism. Employers typically won’t have to worry about a newer worker coming in and quickly leapfrogging them to obtain a promotion simply because they are friends with an upper-level supervisor or because of the way they dress or that they are more effective at playing the game of corporate politics. Instead, workers have a sense that if they pay their dues, they will be rewarded at some point in the future. 

Motivation Boost: 

A merit-based program, on the other hand, can provide motivation leading to increased productivity. Workers who recognize that the best performers are the ones who get ahead may put forth the extra effort they believe it takes to receive promotions. For instance, salespeople who realize that a sales manager position is awarded to the person with the highest sales numbers may strive to produce the desired results, generating additional revenue for the company in the process. 

Reward for Ability: 

Workers possess varying levels of skills and abilities, and a merit-based program rewards those who may have the most to offer the organization in the long run. While tenured employees offer the benefit of greater experience, this does not necessarily equate with more ability. A less experienced worker possessing a greater flair for innovation or creativity may be more likely to generate ideas that help the company more forward in the future. 

Disadvantages of Merit Based Promotion: 

• Merit based promotion system is not beneficial for the senior employees. In such a system, a senior employee may or may not get promotion for a long time. It may lead to his frustration. 

• A senior employee may not like that his junior (in age or service), is dictating him terms for doing duties. 

• Senior employees may start doing lesser work. 

• Such a system may lead to indiscipline in the organization.