The purpose of this study was to investigate the impact of size of performance pay increases on employee perceptions critical to the success of merit pay programs. Perceptions investigated in this study included: 1) instrumentality, 2) expectancy, 3) performance appraisal administration, 4) performance appraisal content, 5) trust in city management, 6) pay communication, and 7) importance of pay. It was hypothesized that individuals who received above average performance pay increases would exhibit significant positive changes toward perceptions of interest while individuals who received below average performance pay increases would exhibit significant negative changes toward perceptions of interest.