Set a budget, decide raises fairly, design a bonus plan, and explain how pay works, using market data you research yourself.
Run it at the same time every year, after performance reviews and before the new fiscal year.
Leadership decides the total increase budget, usually as a percentage of current payroll, based on market movement and what the company can afford.
Managers recommend increases using the merit matrix, performance ratings, and each person's position in their band.
Leaders review recommendations side by side, check for consistency and pay equity, and stay within budget.
Managers deliver increases in person, with a letter confirming the new pay and effective date.
Before increases are approved, compare pay across gender, race, and other groups for similar roles. Fix unexplained gaps in this cycle, with counsel's guidance.
Higher performers get larger increases, and people lower in their band get larger increases than those near the top. The percentages below are an illustration only.
| Performance rating | Lower in band | Around midpoint | Upper in band |
|---|---|---|---|
| 5 Exceptional | 6% | 5% | 4% |
| 4 Exceeds | 5% | 4% | 3% |
| 3 Strong | 4% | 3% | 2% |
| 2 Meets | 2% | 1.5% | 0 to 1% |
| 1 Below | 0% | 0% | 0% |
Illustrative only. Set your own percentages so the total fits your budget. The Merit Cycle Planner calculates the cost as you go.
Above the maximum? Consider a one-time lump sum instead of a base increase, so pay doesn't drift further above the band.
Plus 3 editable templates.