Ours is similar, but the size of your "bucket" is in $USD and is the sumproduct of the base salary and target merit increase for each employee.

Where this gets interesting is multi-national teams. My employees in Chicago get paid a heck of a lot more than my employees in India, but it's all one bucket of funds to allocate. This creates an environment where it is much easier for low-COL employees to get large merit increases than for high-COL employees to get large merit increases.