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Distributing Low Merit Budget Pools

April 3, 2015

What to do with low merit budget pools…
Many organizations have found themselves in the current economy needing to lower their merit budget pools. One of the challenges that come with a low merit budget pool is how to distribute those dollars from low to high performers. If you have a merit pool of less than 3%, it becomes difficult to distinguish between performers utilizing a grid based on performance rating with a percentage increase associated with it.

A new approach…
There is a different way to approach low merit budget pools. One option an organization might consider is to establish the pool of money associated with let’s say a 2% merit budget. Then, rather than a percent awarded for a performance rating, a flat dollar amount could be awarded. If an organization has tracked overall performance ratings for a couple of years, then you can determine what your normal distribution pattern is so that you could model what a flat dollar amount for each performance level could be given and still come in within budget.

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Posted Under: Merit Pay