Merit Increase Process and Guidelines

Merit Guidelines

Employees must have been employed by Southern Methodist University as of January 31 of the current year to be eligible for a merit increase allocation.  The budget allocation is determined by taking a certain percentage of base salaries as of January 31, which designates a pool of money for a manager to distribute.  The amount is determined each year at the board meeting in February and is currently 3.0%.

Merit Increase Guidelines are built around a 3.0% total budget. The 3.0% merit pool will be split out into two components: (1) - 2.0% of the pool will be reserved for base salary increases and will be a reoccurring expense and (2) - 1.0% of the pool will be reserved for one-time merit payments, a non-reoccurring expense.

• 2.0% Pool - These increases are for employees that exhibit exemplary performance in relation to current pay and assigned responsibilities, position within salary range, and performance relative to other members of the review unit. The increase will be added to the employee’s base salary on a reoccurring basis.
• 1.0% Pool - Will be awarded as one-time merit payments, to be paid out in June for staff and August for faculty. One-time merit payments are monetary rewards given to recognize meritorious performance that goes beyond expected or required, or exceptional contributions by employees performing special projects of significant importance.

Although the merit pool allows for variability in what is given to individual employees, overall merit increases awarded for your area must not exceed your allocations, unless you are given prior approval.  We will be comparing the merit increases awarded to the allocations provided to ensure that overall base salary increases do not exceed the 2.0% allocation and one-time lump sum merit payments do no exceed the 1.0% allocation.  Any overall variances identified will be discussed with the appropriate unit so that adjustments can be made to bring the merit increases awarded in line with the budget provided.

Determining Merit Increases and One-Time Merit Payments

Managers are encouraged to distribute merit dollars strategically. Doing so will help motivate, reward, and retain high performers, differentiating employee performance and rewarding performance accordingly.  With this in mind, we discourage across-the-board increases of 2.0% or 1.0% pools. The distribution below provides some guidance around strategic distribution of merit dollars:

• Employees with extreme performance problems:  0% (merit increase) / 0% (one-time merit payment)
• Employees performing below expectations:  0% to less than 2.0% (merit increase) / 0% to less than 1.0% (one-time merit payment)
• Employees with solid, strong performance: approximately 2.0% (merit increase) / approximately .05%  to less than 1.0% (one-time merit payment)
• Employees with high, exemplary performance: greater than 2.0% (merit increase) / greater that 1.0% (one-time merit payment)
• Consider prorating increases for staff who have been employed less than one year.

The merit increase process gives the manager an opportunity to send a clear message ― that excellent performance matters. Treating merit as a “cost of living” increase by distributing the same percentage increase to everyone leaves the impression that performance is not truly valued. Managers who don’t strategically link merit increases to performance run the risk of lowering the motivation of top performers, and of encouraging a standard of mediocre performance from others. Using this opportunity to recognize and reward high performers can support the manager’s goal of retaining top talent.

This process empowers managers, and also requires accountability and responsibility.  Managers must play an active role in assessing employee performance, having ongoing conversations with employees about their performance, and rewarding employees accordingly.

Merit Example - A recommended approach to spending your Merit Dollars:

Below is an example how a manager could spend their merit dollars:

2% Merit Budget: $4,700

1 % Lump Sum Merit Budget: $2,350

Explanation Behind each purposed Increase:

• John Smith: $2,500 merit increase was given to John Smith. He is paid low compared to other Assistant Director 3’s and his performance is ‘Meeting Expectations’.
• Jane Doe: Jane Doe will not receive a merit because her salary is outside of the range of her position. She will receive $1,350 one-time merit payment because her performance is ‘Exceeding Expectations’ and she completed a Chemistry project in January that was recognized by her supervisor.
• Susan Green: $2,200 merit increase was given to Susan Green. She is exhibiting ‘Excellent’ job performance and her salary is in the middle of the range. She will also receive a $1,000 one-time lump sum merit payment for the project work she completed for her VP.
• Frank Harris: Frank Harris does not receive an increase. He received a 'Not Meeting’ performance rating on his performance review this year. Others on his team are more deserving of an increase.

Questions about facilitating productive performance discussions?  E-mail: employeerelations@smu.edu or call x8-3311 and ask for a member of the Employee Relations team.