A merit matrix is the table a company uses to turn the appraisal's outcome into money: rating down one side, position in the pay range across the top, a percentage in each cell. It answers what is a merit increase at work in the only way that holds up, which is that the increase follows the rating by a rule written before the ratings were given. This page explains what does merit increase mean as distinct from a cost-of-living adjustment or a promotion, what are merit increases sized from, how the matrix is built and read, and what is a good merit increase for a company of ten to two hundred to promise, which is less a number than a rule it can keep.
What a merit increase is, and is not
A merit increase is a rise in base pay awarded for performance in the period just reviewed, as distinct from a cost-of-living adjustment applied to everyone, a market adjustment that moves a role's range, or a promotion that moves a person to a new range. In a small company the three are often paid in one envelope and explained as one number, which is how a strong performer ends up feeling that a cost-of-living rise was their reward. Separating them on the outcome sheet, even when the money is paid together, is what makes the merit part mean something.
How the matrix is built and read
Down the side, the calibrated ratings. Across the top, where the employee's current pay sits in the role's range: below the midpoint, around it, above it. In each cell, a percentage: higher for a higher rating, and, for the same rating, higher for someone paid low in the range than for someone already near the top, so the matrix pulls people toward the midpoint over time. The percentages are set so the whole table costs the merit budget when applied to the actual distribution of ratings, which is why calibration comes first. The free final comments worksheet on this site works one employee's outcome: the rating, the increase the matrix gives it, and the new salary.
What a good merit increase is for a small company
This site publishes no percentage, because the honest answer depends on the budget, the ratings distribution and the pay ranges, and a published figure would be quoted in a review as a promise. What a small company can promise is the rule: that the increase follows the calibrated rating through a matrix written before the cycle, that the matrix costs the budget and not more, and that the outcome sheet shows the merit part separately from any other rise. Reviewvo Pro keeps the rating, the matrix cell and the new salary on the employee's cycle record and exports them to payroll.
Questions people ask about merit matrix
What is a merit increase?
A rise in base pay awarded for performance in the period just reviewed, following the appraisal rating through a merit matrix. It is distinct from a cost-of-living adjustment, a market adjustment to a range, or a promotion.
What is a merit matrix?
A table with performance rating down one side and position in the pay range across the top, with a percentage increase in each cell, sized so that applying it to the real distribution of ratings costs the merit budget.
What is a good merit increase?
The one the matrix gives for the rating, from a matrix written before the cycle and sized to the budget. This site publishes no percentage; a figure quoted in a review becomes a promise.