Preparing your next compensation cycle

Comp Cycles
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Now’s the time to prepare the upcoming salary review cycle, or this is your first one and you are wondering what to do? We got your back!

Planning for a successful compensation cycle is especially important as a way to recognize employees. Meanwhile, compensation cycles involve multiples parties and can take quite some time if you are doing it manually (meaning a lot of meetings, emails and stress).

At Qommet, we are pushing an easier way to launch and manage compensation cycles using automated processes and bringing all data together.

But for all those having to do it manually, here is a breakdown on how compensation reviews work and some advices to simplifiy them.

Main steps

Planning a compensation cycle is a great responsibility as it involves multiples persons within the organisation (from the CEO to Managers and HR team).  

Below are the most common steps in a compensation review cycle:

1. Do a retrospective of your last cycle (if any)

This is the perfect time to take a step back and review what has been done in the previous cycle. Also, review your goals and levers for the upcoming review. Is your priority to retain your talents or adjust compensations based on new policies, or both?

2. Review data

Whether you have an HRIS or not, you will have to gather data and check if they are up-to-date.

Your main data should consist in these for each employee:

  • Job information (Entry date, Location, Organisation, Job group, Job Title, Job Level)
  • Evaluation information if handled separately (performance, maturity in the job, etc.)
  • Compensation information (amount for the last year and current year, date of last increase)
Compensation Ranges: If your company uses compensation ranges to ensure internal equity within job groups, it is always good to check if your grid is up-to-date. It will be useful in your review.

3. Define eligibility rules

Defining eligibility criteria will make employees eligible or not to the increase cycle. Most typical eligibility criteria include:

  • Minimum seniority within the company
  • Contract type (Permanent)
  • Last salary raise (to exclude those who already had an increase recently)

4. Define your main increase recommendations

To ensure your cycle go smoothly, it should be easily understood how to reward and which criteria managers should be taken into account when they decide on increases.

Obviously, these criteria should be objective and linked to how you evaluate employee growth throughout the year:

  • Most companies use a performance ratings (for instance, from 1 to 3) or a potential ratings, or a combination of both (9-box)
  • Same principle applies if you use employee growth (learning, owning, mastering) as a metric

Then, take this performance metric and associate for each rating a percentage of increase (%) or a Range of increases, whichever works best for you.

  • For people considered as needing more development, you may decide to apply a minimum increase based on location inflation rate.
  • For people in the medium spectrum, you may decide to apply a percentage based on a budget you are comfortable for the location and based on your growth rate.
  • For the top-tier performers, you may want to consider applying a X factor to the standard increase rate to show your recognition.

To define the right percentage for each ratings, yo can collect data around inflation rates (for minimum increases), growth rates and budget allocated by location.  

For top performers: You may want to promote them to the next job level and associate a minimum increase as well.

5. Identify people to adjust

Using data such as date of last increase or your salary ranges (Compa-ratio) may let you see some discrepancies among your employees. This is the right time to highlight them:

  • For employees who are below your company range, you may want to realign them to the minimum of the compensation grid.
  • For employees who have not received an increase for at least X years, understand if it is linked to performance or other factors.

6. Make your validation process efficient for your team

Once you’ve gathered increase feedbacks from managers, you’ll likely have a few steps of approval to get through before finalisation. However, make your increase validation process simple to track (we know it can become quite a challenge).

The big work here is: maintain a history of who submitted and approved which changes.

7. Communicate and share your philosophy

Communicate and align managers on the compensation policies is also part of the preparation process and will tremendously help you empower them during these processes, so do not hesitate to plan several sessions with HRBPs and Managers!

Qommet Makes Comp Reviews Much Easier

Compensation cycles shouldn’t take up all of your time and effort. We can show you how to automate your HR workflows, which brings together all of the relevant data in one place, so everyone can collaborate on compensation increases.

Consider a software

Investing in a platform can make the compensation review process much easier, faster and more efficient. Qommet can help streamline your process and centralise collaboration between parties, so you can focus on strategic discussions with consolidated reports real-time.

Avoid spreadsheets and centralise everything in one place. Contact us to see how our platform can work for you.