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Merit Increase Matrix Template
A merit increase matrix template to set fair, budget-aligned raises by mapping performance rating against position in band so every increase is consistent.
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What you get
- A performance-by-compa-ratio matrix that sets increase percentages
- Guidance for moving low-in-band high performers toward midpoint
- A budget-check section to keep the matrix within your merit pool
- A worked example showing how to read and apply the matrix
Template preview
A preview of the structure. Download the PDF or CSV for the complete, ready-to-use version.
How the matrix works
Higher performers earn larger increases; employees lower in their band earn more than those near the top, moving everyone toward an equitable midpoint.
Merit increase matrix (% increase)
| Performance rating | Low in band (<90% compa) | Mid band (90-100%) | High in band (100-110%) | Top of band (>110%) |
|---|---|---|---|---|
| Exceptional | 8-10% | 6-8% | 4-6% | 2-3% |
| Exceeds | 6-8% | 4-6% | 3-4% | 1-2% |
| Meets | 4-5% | 3-4% | 2-3% | 0-1% |
| Below | 0-2% | 0-1% | 0% | 0% |
Budget inputs
- Total merit pool— e.g. 4% of payroll
- Eligible population
- Average target increase
Applying the matrix
- 1.Confirm each employee's performance rating and compa-ratio
- 2.Read the cell where the two intersect for the target increase range
- 3.Apply increases across the population and total the spend
- 4.If over budget, scale the matrix down proportionally and re-check
Worked example: a top performer (Exceptional) sitting at 85% compa-ratio falls in the 8-10% cell — a larger raise that rewards performance and corrects an underpaid position in one move.
How to use this template
- 1
Set your axes
Use performance rating on one axis and position in band (compa-ratio quartile) on the other.
- 2
Fill the increase cells
Enter a target increase percentage for each combination, larger for top performers low in band.
- 3
Check the budget
Apply the matrix to your population and confirm total spend fits the approved merit pool.
- 4
Guide managers
Share the matrix as a guide, allowing justified exceptions, so increases stay consistent and fair.
Frequently asked questions
What is a merit increase matrix?
A grid that sets target raise percentages by combining performance rating with position in pay band. It makes increases consistent and steers pay toward equity by rewarding strong performers who are underpaid.
Why factor in compa-ratio, not just performance?
Without it, a high performer already at the top of their band keeps getting big raises and exceeds the range. Compa-ratio directs larger increases to those low in band, closing gaps and managing band limits.
Is the matrix a hard rule?
Treat it as a guide, not a cap. It keeps managers consistent and the budget controlled, but allow documented exceptions for retention risk or unusual circumstances after calibration.