Template

Merit Matrix Template Excel and Google Sheets (+ Budgeting Tool)

Global HR

Get the resource for free

Running a merit cycle is rarely simple. What should be a structured, rewarding process often turns into a scramble. Spreadsheets everywhere, unclear calculations, back-and-forth with managers, and a fog of uncertainty about pay raises, fairness, and consistency.

For global teams, it gets even more complicated:

Workers are spread across countries with different currencies and cost-of-living tiers
Pay bands vary by role, location, and level of seniority
Performance ratings don’t always translate clearly into salary increase decisions
HR and comp leaders are expected to ensure internal equity and external competitiveness—all at once

Most merit templates you can find online stop at mapping a performance score to a percentage increase. But for real-world pay decisions, that is simply not enough.

This merit matrix template is built for that reality. It is a holistic compensation planning tool built to reflect how merit decisions actually work, in all their complexity.

Merit matrix template overview

This is a robust, dynamic, and customizable merit matrix template designed for professionals who want more than just a plug-and-play percentage. It’s a smart decision-support tool that adapts to your pay philosophy, workforce location, and performance criteria.

Unlike standard spreadsheets, this template allows you to:

Account for compa ratios and market tiers
Adjust for global currency differences
Model salary outcomes in the current (payroll) and default currency
Show how merit increases would increase your salary budget
Include eligibility rules, like exclusion rules for outliers (e.g, workers with compa ratios higher than 1.2)
Keep track of past increases for better future decisions

Why this template is a game-changer:

Built-in instructions help first-time users navigate setup with ease
Customizable logic lets you define what’s considered “eligible,” “within range,” or “above band”
Clarity on who gets what, and why
Highly customizable for different org sizes and stages
Multi-currency and location-aware, making it ideal for distributed teams
Designed with equity in mind

Who this template is for

This template was designed with real teams and real complexity in mind. It’s especially valuable for:

People operations and HR Business Partners who need a fair, transparent, and scalable way to run merit reviews across multiple markets
Compensation and Total rewards analysts who live in Excel and Google Sheets and need clear logic, error-proof formulas, and models that reflect market data, compa ratios, and performance tiers
Startup and scaleup leaders who are running their first merit cycles or leveling up from ad hoc decisions
Anyone tired of chasing down formulas, fixing errors, or second-guessing salary decisions

How to use this template

What you need before getting started:

A list of all currencies used for payroll, currency exchange rates, and local salary normalization rules
Documented salary ranges to calculate compa ratios. The compa ratio calculation uses the midpoint of a salary range and the current salary. So you must have this data.
To link specific salary increases to performance scores, a completed performance review cycle with performance ratings is needed. If you don’t have this, you can use our annual performance review template to conduct your reviews. Then, use the scores to perform the merit review cycle.
Historical records of previous salary increases. These will provide a snapshot of previous increases (%) and anchor decision-making in your current merit cycle. For example, managers can avoid overcompensating someone who has already had a large increase recently

Once you have the required information, you can get started with mapping your merit increases:

Set the foundation: Define your locations, currencies, and performance ratings on the setup sheet
Input your workforce data: Add your people data, including performance ratings, current salary, midpoint of salary range, and salary before last raise
Customize your merit logic: Use percentage-based or compa ratio logic to guide increases. Adjust participation thresholds, tiers, and guidance ranges
Review and model: See how different scenarios play out across your team, roles, and markets
Export clean results: Pull final recommendations into a format ready for review or implementation

Download our merit matrix template to streamline your next comp cycle and drive equitable pay decisions.

FAQs

What is a merit matrix?

A merit matrix is a structured tool used in compensation planning that helps determine salary increases based on employee performance ratings and position within their salary range (often represented by compa ratio).

How it works:

One axis of the matrix shows performance levels (e.g., “Exceeds Expectations,” “Meets Expectations”)
The other axis shows compa ratio bands (e.g., <0.9, 0.9–1.1, >1.1)
The intersecting cells suggest raise percentages based on these two factors

What is the difference between a salary increase and a merit increase?

A salary increase is any raise in base pay (which can be due to promotion, inflation, or market adjustment). In contrast, a merit increase is a raise specifically tied to performance and a way to reward performance in organizations.

What is a typical annual merit raise?

The annual increase would vary by industry and economy, but it commonly falls between 3% to 5% for employees meeting expectations. Top performers might receive 6–8% or more.

What is an example of a merit pay system?

Example: A company rates employees annually and gives merit raises as follows:

High performing employee + low compa ratio = 6% increase
High performing employee + mid compa ratio = 4%
Employee who meets expectations + mid compa ratio = 2%
Employee below expectations (regardless of compa) = 0%

How can organizations determine merit increases?

To determine merit increases:

Evaluate performance ratings
Compare current pay to pay range (compa ratio)
Use a merit matrix or budget guidelines
Ensure equity across teams and budget alignment

How can I create a merit matrix?

A merit matrix is typically a table that cross-references performance ratings with position in range (compa ratio) to determine salary increases. To create one:

Define performance categories (e.g., Exceeds, Meets, Below expectations)
Set compa ratio bands (e.g., <0.9, 0.9-1.1, >1.1)
Assign raise percentages based on both inputs
Apply the matrix in performance review cycles
Calculate salary raises, confirm the final salary adjustments, and get approvals

What is the formula for salary increase percentage in Excel?

If A2 is the old salary and B2 is the new salary, the formula will be:

=(B2-A2)/A2. Format the cell as a percentage to show the increase.

What is the formula for salary increase?

To calculate the increase amount:

New annual salary = Old annual salary * (1 + Increase %)

Example: A 4% increase on $50,000 = 50,000 * 1.04 = $52,000

What is the purpose of a performance matrix in a compensation system?

The performance matrix helps link pay to performance objectively. Using structured criteria ensures that compensation decisions are consistent, equitable, and support a pay-for-performance culture.