Using Performance Appraisal for Merit Increase

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Pay Adjustment Matrix or Pay Guide Chart is a rapidly growing tool for annual pay increases. For this, we would like to give some highlight: This Matrix bases the pay adjustments on an individual’s compa-ratio (the pay level divided by the mid-point of the individual’s pay range). In this way, it depicts the person’s movement in an organization which depends on his/her performance. If a person is placed on this chart with his/her mid-point on Y Axis and Performance Appraisal result (Unsatisfactory, Satisfactory, Exceeds Performance) on X Axis, then a better understanding can be had about what increment he/she can be offered.

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Experts suggest that HR professionals should not use bell curve as the only tool to help themselves place employees in categories, but they are highly advised to match them with The Salary Adjustment Matrix. For example, your receptionist performed very well and appeared on top of bell curve, but his/her salary is above Mid-Point, so you can give him/her pay increase on the basis of assigned percentage for different levels such as 25th Quartile, 50th Quartile or 75th Quartile, on the Pay Adjustment Matrix. It’s not that you will give 10% increase (for example) to all Top performers if half of them fall at 25th Quartile and half at 75th Quartile. There needs to be a specific increment percentage for every Quartile vs. Performance Result/level as suggested by (Robert L. Mathis, John H. Jackson, HRM, 13th Ed.)
Of course, a lower percentage would not be resented by those already exceeding Mid-point or Market Pay. The fine approach is to shed some light on the annual CPI to adjust the Cost of Living Expenses and go for additional increment percentage which is based on Performance Appraisal. But, the Bell Curve is only advised as an aid to form the basis. But, the solution exists at the use of Pay Adjustment Matrix.

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