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.

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.