Book excerpt: The aim of the study is to explore the challenges of implementing pay for performance in the federal government by assessing perceptions of fairness in a federal agency's merit pay system. Analysis of data collected from the U.S. Securities and Exchange Commission, agency stakeholders, and semi-structured interviews from experts, agency stakeholders, and employees revealed that fairness and equity concerns related to diversity exist as well as other implementation challenges. Study results support prior research on the shortcomings of pay for performance in the public sector; however, this study expands pay for performance literature by exploring its impact on a diverse workforce. Future research is needed to explain why differences in performance ratings and pay exist among employee groups and if these differences have a significant long-term effect on the federal workforce.