9 key points to consider as pay rise planning season looms
The end of summer for those working in HR and reward means thoughts turning to the upcoming compensation review and budgeting season.
Over the last few years, the employer-employee dynamic has changed dramatically. Inflation, the Great Resignation, and trends like ‘act your wage’ and the anti-work movement have all contributed to a shifting perception of employment and the employee-employer relationship.
1. Weighing considerations
It’s essential to assess whether your organisation requires adjustments from previous cycles. This means delving into the talent market — from both recruitment and retention standpoints — and understanding who you compete with for talent is crucial.
2. Aligning with executives
To ensure alignment and avoid wasted effort, it’s vital to engage with executives early in the process. Understanding their top priorities and concerns — especially regarding compensation — will lay the foundation for a successful planning cycle.
3. Conducting market analysis
Conduct a comprehensive market analysis and review to understand compensation levels and demands. This step may involve multiple iterations throughout the year to capture relevant data and respond to employee questions effectively.
4. Mapping projected increases
In this phase, you will start mapping projected increases and focus on crucial aspects like training, enablement and communication. Investing time in training managers and empowering leaders and employees during this phase can make or break the compensation planning process.
5. Ensuring a repeatable cycle
With a well-structured and repeatable cycle, you can prepare for future compensation planning proactively. Anticipating trends and strategically aligning compensation with organisational goals will allow for a more efficient and strategic planning process.
6. Considering key questions
Key questions usually arise during the compensation planning process, such as those related to talent, internal and external factors influencing compensation decisions, and the optimisation of compensation budgets while addressing pay equity, compression and labour market trends. All should be considered to ensure success in this step.
7. Focusing on data and process
Grounding decisions in comprehensive market data and understanding the organisation’s unique needs will enable you to make more informed and impactful compensation choices. Engaging with finance teams and aligning with strategic initiatives will foster collaboration and mutual understanding.
8. Emphasising communication
Transparent communication with employees throughout the compensation planning cycle is essential, and employee expectations of transparency are growing. This cycle may be your opportunity to progress pay transparency, sharing the process and being data-driven in explanations, leading to a more engaged and satisfied workforce. Also consider how confident your managers are in having compensation conversations and where you think they need more support.
9. Ensuring all factors are addressed
Beyond merit increases, carefully consider other aspects like promotions, market adjustments, pay equity and remote pay strategy. Leaving no stone unturned will lead to a comprehensive and fair compensation plan for all employees.
Compensation is your talent insurance
Effective compensation planning plays a pivotal role in driving organisational success and employee satisfaction. By designing fair and competitive compensation packages, you can attract and retain top talent, foster a motivated workforce and ultimately achieve sustainable growth. Striking the right balance between financial rewards, non-monetary incentives and performance-based recognition helps ensure a harmonious work environment that will benefit the organisation overall.
Always treat compensation as a talent insurance and ensure talent strategy is aligned with compensation strategy.
To find out how Payscale can help with your year-end planning, speak to an expert today.
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At Payscale we provide technology solutions and services for companies to manage their compensation data/survey participation, job/grade pricing, compensation reviews and pay equity analysis.