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August 18, 2010
Merit Increases Policy

In a BLR webinar entitled "Pay Grades and Salary Increases: How to Build a Competitive, Equitable Compensation System in Your Workplace This Year," Dan Kleinman, principal of Dan Kleinman Consulting enumerated how a merit increase policy should explain how you use "merit matrices" and other tools to correlate Minimum, Midpoint and Maximum merit bonuses and raises with employees' performance ratings.

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A sample merit matrix (assuming salary ranges) would break down a performance rating into Excellent, Good, Needs Improvement and Unsatisfactory categories with corresponding percentages for:

Minimum:

  • 5.00%
  • 3.75%
  • 2.00%
  • 0%

25th percentile:

  • 4.75%
  • 3.50%
  • 1.75%
  • 0%

Midpoint:

  • 4.50%
  • 3.25%
  • 1.50%
  • 0%

75th percentile:

  • 4.25%
  • 3.00%
  • 1.25%
  • 0%

Maximum:

  • 4.00%
  • 2.75%
  • 1.00%
  • 0%

Dan Kleinman is the principal of Dan Kleinman Consulting (www.dankleinmanconsulting.com), a California-based compensation and human resource consulting firm. For the past 18 years he has served a broad spectrum of regional, national and international companies providing compensation, performance, organizational planning and reward-system design services.

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