Once or twice a year, People teams find themselves drowning in fifty different spreadsheets with columns that go to “QZ”. You run your standard process to break them down for each manager, diligently removing all the Google Sheet history so no one can view the master sheet with everyone’s comp in it. Next up, distribute to managers and hope none of your formulas get broken — and alas, you’re off to the races!
Merit cycles are that moment when you can take your pay-for-performance model and see it in action! For companies large and small, this is quite the feat.
Which is exactly why we built our compensation planning tool.
In an attempt to assist teams in avoiding speed bumps, we’ve compiled a few best practices to help with your next merit cycle:
Set eligibility guidelines and timing in-line with your comp philosophy: A few common eligibility requirements are:
Now, you have a list of eligible employees for this cycle.
Budget for all your teams: Budgets look different company-to-company, but a few common cases are:
Make recommendations for managers and decide how much decision-making latitude you’d like to give them: If you’re thinking Excel formulas and how to lock them from being edited, you’re thinking correctly. Recommendation logic is which factors you’re basing someone’s comp change on and is specific to each company. This could include salary, variable, bonus, and even new equity shares. A few common approaches we see:
This logic will inform a “recommendation” for what managers should suggest, and it’s up to you to determine how much override power and discretion you’d like to extend.
Run executive approvals: Once you’ve gathered feedback from managers, you’ll likely have a few layers of approval to get through before these changes make their way to a reward letter. Approval flows differ from company to company and even department to department.
The big kicker here is: maintain a history of who submitted and approved which changes. This way, in a year’s time, when an auditor is pestering you about who approved Jane’s raise, you are ready with the evidence!
The fun part: Come up with a comms plan for employees: Reward letters have become table stakes and .pdf total comp statements tend to be a “we did it once” activity (they’re a ton of work and impossible to keep up-to-date).
However you decide to communicate the results to your employees, just make sure you do!
This should be the magic moment when comp philosophies come to life, keep employees engaged, and keep them around. If you’re looking for inspiration, you can check out Pave Total Rewards Statements and Reward Letters here!