Merit Increase Matrix

Plan merit increases using performance and each employee’s position in their salary range. Set your matrix, enter employee details, and see the proposed raises, total cost, and how the plan compares with your budget.

A working model with the structure in place

On the matrix tab, set the range-position cut points and increase percentages for each performance rating and band. Add each employee’s rating, current salary, and range minimum and maximum. The workbook calculates range position, the applicable merit increase, the dollar increase, and the new salary, along with the total cost and blended increase. The Budget Scenario tab compares the plan with your approved merit budget, showing remaining headroom, the blended increase against target, and the scale factor needed to bring spending in line. The one-page Summary shows the cost and new payroll. The Benchmark tab includes 2026-cycle merit and total salary increase budgets from the major surveys. The workbook opens with a worked example so you can see how the calculations work.

Connect merit increases to performance and pay position

A flat percentage increase gives the largest dollar raises to employees with the highest salaries, regardless of performance. A two-axis matrix considers both performance and salary range position. Employees with the same rating receive larger percentage increases lower in the range and smaller increases near the top. This helps strong performers who are lower in their ranges catch up. Keep merit separate from cost-of-living, market, and promotion adjustments, which come from other budgets. Review the results for pay equity before finalizing the cycle, since merit decisions can either narrow or widen existing pay gaps.

Built for

• HR and compensation leaders running a merit cycle with a consistent matrix based on performance and salary range position instead of a flat percentage or individual manager discretion.
• Finance and compensation partners reviewing merit costs against an approved budget, including remaining headroom, the blended increase, and a scale factor to bring spending in line.
• Business owners and managers planning raises across a small team and wanting a consistent basis for explaining individual decisions.

Build salary ranges with the Salary Band Builder. For a pay-equity review, see the Pay Structure and Internal Equity Review. To calculate a promotion funded outside merit, use the Promotion and Internal Equity Calculator.

Before you buy

What format is it, and can I edit it?

You receive one Excel workbook that also works in Google Sheets. The download is five files: the workbook, a Start Here, the one-page Quick Reference, the product license, and a short guide to using it in Google Sheets. Every input and formula is editable. Insert rows to add employees, adjust the matrix to match your policy, or duplicate the file for a second group or next year’s cycle. Your download link is available immediately after checkout, with the same link included in your emailed receipt.

How accurate is the result?

Your matrix settings and salary ranges determine the planning estimates. Range penetration measures where an employee’s salary falls between the range minimum and maximum. The cut points and increase percentages you choose determine the proposed raises. Each figure is calculated from your inputs, and the Budget Scenario tab shows whether the plan fits your approved budget.

What is the difference between merit, cost-of-living, and market increases?

A merit increase rewards individual performance, and this matrix helps allocate those increases. A cost-of-living adjustment addresses inflation across the board. A market or structure adjustment realigns salaries or ranges to market rates, while a promotional increase funds a move to a higher level. These come from separate budgets, keeping the merit discussion focused on performance and salary range position.

What is the refund policy?

Digital products are covered by a 30-day money-back guarantee. To request a refund, email support@truestephr.com or reply to your receipt within 30 days of purchase. Questions? Email support@truestephr.com.

These are planning estimates, not legal advice. Review the proposed increases for pay equity and compliance with applicable pay laws before final approval.

How the download works

Your files arrive as a single ZIP download, best opened on a computer. Save it, extract it (right-click and select Extract All on Windows, or double-click on a Mac), then open the Start Here file first. PDFs open in any reader, and editable files work in Microsoft Excel or free equivalents, including LibreOffice and Google Sheets. No other software is needed. Step-by-step help for every device is at truestephr.com/pages/download-help.