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How to Plan Your Comp Cycle 

How to Execute a Strategic and Efficient Compensation Cycle

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How to Build Your Compensation Cycle Timeline Like a Pro

Jen Dewar
Sep 28, 2022 6:15:00 AM

Compensation review cycles have a lot of moving parts and always seem to take longer than you expect. But when you have employees who are eagerly anticipating pay increases, you kick into high gear to get things done. This often equates to late nights—and a lot of coffee.

Run a more efficient, strategic compensation review cycle in 2023 with some additional planning and foresight. A comprehensive compensation cycle timeline can help.

What to include in your compensation cycle timeline

Every organization’s timeline will differ, based on things like the size of the organization, the number of stakeholders, and what's in your HR tech stack. Here are some activities you may want to incorporate into your compensation cycle timeline:

  • Call a post-mortem meeting: Get together with key stakeholders to review your last compensation cycle and make adjustments to the steps and timeline as needed. If approvals were late, for instance, perhaps stakeholders needed more time to collaborate, make their own adjustments, and provide their sign-off.
  • Evaluate and implement software: Re-evaluate your HR technology stack so you can run a more efficient and strategic compensation cycle. You may be able to build a significantly more streamlined process with the right performance management software and compensation management software. Just be sure to leave time for solution onboarding and user training.
  • Define and assign roles: Determine who will view, edit, and approve compensation adjustments and for whom. For instance, direct/line managers might see limited data for their direct reports, while directors and vice presidents may have access to their entire teams. HR, Compliance, and Finance are generally able to access the entire compensation cycle and make decisions.
  • Update salary bands: It’s a good idea to revisit your salary bands once or twice a year to ensure they still align with your compensation strategy. This is particularly important as high competition for talent is driving significant wage growth.
  • Run a compensation analysis: Run a compensation analysis to discover how employee salaries compare to your updated salary bands and to one another. This will identify where strategic adjustments should be made.
  • Request budget: Build a salary increase budget that will accommodate strategic adjustments, merit-based raises, and other necessary increases, and meet with your finance team to make your case.
  • Allocate the budget: Once the budget is finalized from your finance team, determine what you will allocate to strategic adjustments, merit-based raises, and executive hold-backs. It’s generally a good idea to hold back 5-10 percent for executives to make additional targeted and discretionary adjustments at the end.
  • Get buy-in: Run your plan by your stakeholders and get their buy-in for roles, timelines, and budget.
  • Provide training: Sync with stakeholders to ensure they’re familiar with your process and software. Managers, in particular, can benefit from training around pay equity and raise cycle communication expectations. A video walk-through in addition to written documentation can give stakeholders something to reference later.
  • Conduct performance reviews: Ensure plenty of time to complete performance reviews if they are part of your compensation cycle. These can be time consuming for managers, and may be delayed for any number of reasons.
  • Set approval deadlines: Set approval deadlines for each individual stakeholder, buffering in time for late approvals and post-approval changes. Remember to give your team time to review recommendations for targets and pay equity, and make appropriate adjustments.
  • Employee communication: Employees should understand what they earn, why they’re compensated that way, and when changes take effect. A compensation statement can help with this.
  • Second cycle: If you run a mid-year compensation review in Q3 to make pay equity adjustments or provide raises to employees who weren’t eligible in Q1, add a timeline for that as well.

A sample compensation cycle timeline

Smaller companies may be able to book a conference room or a day-long Zoom and knock out a raise cycle fairly quickly. Larger organizations, however, may need several weeks or months to plan and run their compensation cycles. You should also account for holiday schedules, vacation plans, and other initiatives as you plan out your timeline. Here’s a sample timeline to help you start thinking about your own:

Year-round: Evaluate performance management and compensation management software

April 1: Compensation cycle post-mortem [the best time to do this is immediately after you run a compensation cycle, but it’s never too late to consider improvements on your process]

October 3: Define and assign roles

October 3-14: Update salary bands

October 17-28: Run a compensation analysis and build your salary increase budget

October 31: Request salary increase budget from finance

November 18: Get final budget from finance

December 5: Allocate the budget

December 16: Get stakeholder buy-in

January 4-6: Provide stakeholder training

January 9-18: HR makes strategic compensation adjustments and managers conduct performance reviews

January 18-27: Direct/Line manager merit-based adjustments

January 30-February 8: HR or compliance adjustments

February 8-17: Director-level approvals

February 20-28 VP-level approvals

March 10: Finance approves; sends to Payroll

March 20: Share results with employees

April 1: New compensation becomes effective

Final thoughts on building a compensation cycle timeline

Compensation cycles can be stressful, but a little foresight and planning can go a long way in creating a smoother process for everyone. Planning your timeline and getting buy-in from key stakeholders can help you keep everyone on track and accountable for their deliverables.

Investing time now in evaluating and implementing compensation management software can ensure a more efficient review cycle that saves valuable time for your stakeholders.

With the right solution, your compensation analysis will be completed faster. Approvals will be faster and easier to audit and won’t get mucked up in spreadsheets. Exports to payroll will make for seamless updates. And compensation letters will be easier to administer and share with employees. Each of these improvements in efficiency can compress your timeline significantly and ensure pay increases are right on schedule.

See how Varo ran a compensation cycle in two weeks with Compaas.

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