Guide: Admins Getting Started Part 06 - Configuring Performance Rating Systems

This guide explains how HR Administrators configure the Performance Rating System, including both Rating Scale and Merit Matrix options, and how each impacts manager compensation guidance.

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Overview of the Performance Rating System

The Performance Rating System controls how performance data influences compensation recommendations. HR Administrators can configure one of the following systems:

• Rating Scale – A linear list of performance ratings with recommended merit increase ranges

• Merit Matrix – A two- or three-dimensional matrix that combines performance with position in range

Only one Performance Rating System can be active at a time.

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Selecting the Active Performance Rating System

Navigate to Configuration → Performance System.

Use the Active Performance Rating System dropdown to select:

• Rating Scale, or

• Merit Matrix

Select Save Changes to apply the active system.

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Option 1: Rating Scale

What the Rating Scale Does

The Rating Scale allows HR Administrators to define performance labels and associate each with a recommended merit increase range (minimum and maximum percentages).

These recommendations are displayed to managers during merit entry but do not enforce outcomes.

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Configuring the Rating Scale

For each performance rating:

1. Enter a Label (e.g., “Meets Expectations”)

2. Define the Minimum Merit Increase

3. Define the Maximum Merit Increase

Best practice is to list the lowest performance rating at the top and the highest rating at the bottom.

Ratings can be reordered using the drag handles on the left.

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Adding or Removing Ratings

• Select + Add New Rating to add a performance level

• Use the trash icon to remove a rating

Ratings that have already been used in an active cycle should be reviewed carefully before removal.

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Impact on Manager Experience

When the Rating Scale is active:

• Managers see a Performance Rating column

• Selecting a rating displays the recommended merit increase range

• Managers retain flexibility to enter values outside the range if permitted

If no Rating Scale is configured, performance rating fields are hidden from manager views.

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Option 2: Merit Matrix

What the Merit Matrix Does

The Merit Matrix supports two- or three-dimensional compensation guidance, providing more granular recommendations based on employee positioning.

The standard two dimensions are:

• Performance Rating (rows)

• Position in Range (columns)

An optional third dimension can be added using Matrix Segments.

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Understanding Position in Range

An employee’s Position in Range is calculated using either:

• Compa Ratio, or

• Range Penetration

This is determined by the Performance Comparison Metric selected on the Active Features tab.

Position in Range values determine which column of the matrix applies to an employee.

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Matrix Segments (Optional Third Dimension)

If needed, a third dimension can be defined using the Matrix Segment field in the employee import data.

Common examples include:

• Country

• Division

• Business unit

• Executive vs non-executive groups

Each Merit Matrix can be associated with one or more Matrix Segments.

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Configuring the Merit Matrix

For each Matrix Segment:

1. Define the number of Position in Range columns

2. Specify the range thresholds for each column

3. Enter minimum and maximum merit increase percentages for each cell

Tabs allow switching between Matrix Segments (e.g., United States, United Kingdom, Italy).

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Performance Ratings Within the Matrix

Performance Ratings appear as rows in the matrix and can be:

• Added

• Reordered

• Removed

Each row must be populated across all Position in Range columns to ensure complete coverage.

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Choosing Between Rating Scale and Merit Matrix

Use a Rating Scale if:

• You want simple, linear guidance

• Position in range should not influence recommendations

Use a Merit Matrix if:

• You want to factor both performance and pay positioning

• You need differentiated guidance by country, division, or other segments

Only one system can be active at a time, but configurations can be changed between cycles.

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Best Practices

• Finalize the Performance Rating System before managers begin entering recommendations

• Validate Position in Range calculations during testing

• Review matrix coverage to ensure no employees fall outside defined ranges

• Test manager views to confirm guidance appears as expected

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Summary

The Performance Rating System defines how SimplyMerit delivers compensation guidance to managers. Whether using a Rating Scale or a Merit Matrix, proper configuration ensures recommendations align with your compensation philosophy while maintaining flexibility.

If you would like to learn more about how a Merit Matrix helps to drive better pay outcomes, please visit https://morganhr.com/merit-matrix or contact us at [e-mail].

→ Next : Admins Getting Started Part 7 - Importing Employee and Compensation Data