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Erin from Time Saving Templates introduces a new Employee Performance Review Template, which complements existing templates that require performance ratings. The new template integrates with a variable compensation bonus calculation worksheet and an annual merit increase template, allowing for a structured bonus matrix and base pay increases based on performance ratings. In the tutorial, Erin presents a blank version of the template, designed for up to 20 employees, featuring a dedicated tab for each employee's details. This setup facilitates efficient performance evaluation and compensation planning.