Setup Considerations: merit matrices and salary bands

What this achieves

Salary bands and merit matrices are the two structures that decide what a manager is told to propose. They are cheap to design before a cycle exists and expensive to change once proposals are being made against them.

Decision 1: how many bands, and how wide

A band belongs to a grade, so your band structure is decided by your grade structure. Narrow bands make pay predictable and force a promotion to move anyone materially; wide bands allow a long career inside one grade but make position in range the number that matters.

Example: if HC Corp UK Ltd’s engineering grades overlap heavily, a strong Senior Software Engineer can be paid more than a weak engineer one grade above, which is either the flexibility you wanted or a fairness problem you did not intend.

Option	Description
Narrow bands	Pay is predictable and comparable. Progression depends on changing grade.
Wide bands	One grade can hold a long career. Position in range carries most of the meaning, and the merit matrix does more work.

Decision 2: band currency

A band carries its own currency, and a salary is only compared against a band when the two currencies match. Where they differ, the comparison does not happen at all.

This is the single most consequential decision on this page, and it is covered in full under what is expensive to change later.

Decision 3: which rating scale the matrix uses

The matrix takes its rows from a rating scale, so the scale decides how finely you can differentiate. A three-level scale gives you three rows; a five-level scale gives five, and room to separate solid performance from exceptional performance.

Changing the scale after cycles have run makes historic matrices harder to compare, because a rating on the old scale does not mean the same thing on the new one.

Decision 4: how much room to give managers

Every cell carries a recommended percentage plus a minimum and a maximum. The width between minimum and maximum is how much discretion a manager has before a proposal becomes an exception.

Example: a cell recommending 4% with a range of 3–5% at HC Corp UK Ltd lets Olivia Bennett reflect a difference between two engineers without a conversation with HR. A range of 0–15% means the recommendation is decoration.

Narrow ranges make the cycle consistent and generate more escalations. Wide ranges make the cycle fast and make the matrix advisory.

Decision 5: one matrix or several

One matrix applied everywhere is the simplest thing to explain and the easiest to audit. Several matrices let you treat a commercial population differently from a corporate one, at the cost of having to justify why two people with the same rating were told different numbers.

Start with one and mark it as the default. Add a second only when you can name the population it exists for.

What is expensive to change later

Decision	Cost of changing later
Band currency	High, and quiet. Where a band’s currency differs from the salary being checked, the band check does not run. Nothing is compared, and the proposal is not blocked.
Band minimum and maximum	Medium. Proposals already submitted were judged against the old figures, and their position-in-range values do not recompute.
Rating scale behind a matrix	Medium. Historic cycles stay readable, but ratings stop being comparable across the change.
Cell percentages	Low, before a cycle launches. A cycle already launched keeps working from the copy of the matrix it took.
Matrix name and description	Low. They are labels.

The currency row deserves its own sentence, because it is the failure that does not announce itself as one. A salary in one currency against a band in another is not checked against that band, and the proposal proceeds as though it passed. There is no exchange rate anywhere in Humavera to fall back on. Set each grade’s band in the currency the people in that grade are actually paid in, and where a grade spans two currencies, expect the check to be unavailable for one of them.

What happens next

Once bands and at least one active matrix exist, you can create a compensation cycle and choose the matrix it runs on. From that point the structures are effectively frozen for that cycle, because the cycle keeps working from the copy it took at creation.