Increases & Changes
Merit increase
Also called: merit raise, performance increase, annual increase
A pay increase awarded for performance, typically as part of an annual review cycle.
Merit increases are pay adjustments tied to individual performance, awarded once per year as part of the comp cycle. They're distinct from market adjustments (which apply to ranges) and promotion increases (which apply when an employee changes level).
Typical merit-increase budgets in the US:
- Average performers: 2.5–3.5% in normal markets
- Strong performers: 4–6%
- Top performers: 7–10%+
- Underperformers: 0%
Merit budgets are set annually based on inflation, market movement, and the company's compensation philosophy. They're typically published in major comp surveys (Mercer, WTW, Gallagher) several months ahead of the comp cycle so HR can plan.