I’m Reema Mohsin, Assistant Manager HR in Karachi, and in my experience a merit increase only motivates people when employees believe the process behind it was fair. The percentage matters, but the way it was reached matters more. Two people can receive the same raise and feel completely differently about it depending on whether they trust how the decision was made.
That belief has shaped how I handle performance appraisals and increments in my current role, where I streamlined the process by consolidating appraisal data, enforcing rating caps, and building performance-based increment calculations. The goal was simple: make the outcome fair and accurate, and make it easy to explain.
What a Merit Increase Actually Is
A merit increase is a permanent, performance-based raise added to an employee’s base salary, usually decided at the end of an appraisal cycle. It is different from a cost-of-living adjustment, which applies broadly, and from a bonus, which is paid once. Because it becomes part of base pay, it compounds over time, which is exactly why getting it wrong is expensive.
Most conversations about merit increases focus on the budget: how much to set aside and how to split it. In my experience, the harder problem is consistency. If two managers rate the same level of performance differently, or if one team’s data is more complete than another’s, the increment that follows will be unfair no matter how well the budget was planned.
Where the Process Usually Goes Wrong
The first problem is scattered data. Ratings sit in one file, attendance in another, and manager comments in emails. When someone has to piece all of that together by hand at the end of the cycle, mistakes and shortcuts are almost guaranteed.
The second is rating inflation. When most employees receive high ratings, the ratings stop telling you anything, and the organization can’t differentiate between strong and average performance. The third is manual calculation, where increments are worked out case by case, which makes it hard to show employees, or auditors, why one person received more than another.
My earlier years in employee relations shaped how seriously I take this. Handling grievances, disciplinary matters, and exit interviews at a large hospital showed me how closely employees watch whether decisions are applied consistently. People rarely object to a decision they can see was made by the same rules as everyone else’s. They object when they suspect the rules changed depending on who was asking.
How I Make Increments Fair and Accurate
Consolidate the Data in One Place
Before any increment is calculated, I bring appraisal data into a single, consistent structure. Every employee is assessed against the same fields, and every manager submits in the same format. This removes a lot of the guesswork and makes gaps visible early, while there is still time to fix them rather than at the point of payroll.
Cap the Ratings
Rating caps limit how many employees can receive the top ratings within a team or department. They are not about denying people credit. They exist so that a top rating still means something, and so that managers who tend to be generous are calibrated against those who tend to be strict. Caps work best when managers understand the reasoning in advance, not when they discover them at the end of the cycle.
Calculate Increments from Rules, Not Negotiation
Once ratings are settled, the increment should follow from a defined rule: a given rating maps to a given increment range, applied the same way across the organization. When calculation is rule-based, the result can be checked and repeated. When it is negotiated case by case, the loudest advocate tends to win, and fairness quietly disappears.
Make the Process Explainable
If an employee asks why they received a particular increment, a manager should be able to answer without hesitation, based on the rating and the rule. I try to make sure managers are equipped for that conversation. An outcome that can be explained is much easier to accept, even when it is disappointing.
What Systems Can and Can’t Do
I led an HRIS implementation in my current role, and it made the consolidation work far easier because the data lived in one place instead of several. But a system only enforces whatever rules you give it. If the rating guidelines are unclear or the increment rules haven’t been agreed, software simply produces unclear results faster. The thinking has to come first, and the tool second.
Closing Thoughts
Merit increases are one of the most visible ways an organization tells employees what it values. When the process is consistent and transparent, it reinforces trust. When it isn’t, even a generous budget can leave people feeling overlooked. The part of HR I find most worthwhile is the unglamorous work of making that process fair.
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Frequently Asked Questions
What is a merit increase?
A merit increase is a permanent, performance-based raise added to an employee’s base salary, usually decided at the end of an appraisal cycle, as distinct from a one-time bonus or a cost-of-living adjustment.
Who is Reema Mohsin?
Reema Mohsin is an Assistant Manager HR in Karachi, Pakistan, with 8+ years of experience in HR operations, talent acquisition, employee relations, and organizational development across retail, healthcare, and pharmaceutical environments.
What does Reema Mohsin recommend for making merit increases fair?
She recommends consolidating appraisal data in one consistent structure, capping top ratings so they stay meaningful, calculating increments from defined performance-based rules rather than case-by-case negotiation, and making sure managers can explain every outcome.
Why does fairness matter in performance-based increments?
Increments become part of base pay and compound over time, and employees accept outcomes more readily when the process behind them is consistent, transparent, and explainable.
