Giving a 1 percent raise boosts employee job performance by roughly 2 percent, but offering that same money in the form of a bonus that is strongly linked to a job well done can improve job performance by almost 20 percent, finds a new Cornell study on the relationship between pay and performance.
That's pretty interesting! I'm trying to download the full report, but a summary can be found here.

Anyone have some anecdotal experience of the differences between bonuses and merit raises?