It’s that time of year for every HR team’s favorite question: “When are we doing salary increases?” This question might be causing you some extra anxiety if you’ve recently decided to make changes to how you address increases and salary reviews as well.
Whether you’re continuing an existing process or planning for a new one, here are four tips to improve your compensation cycle.
1. Stop Calling It an “Increase Cycle”
Odds are your organization has a history of reviewing performance and compensation around the same time every year — maybe per anniversary date or at an annual focal date. And more often than not, that review warrants increases for many. However, by calling it an increase cycle, you could be creating entitlement. Call it a salary review, compensation review, salary and performance review … And let people know WHY it’s being reviewed and WHAT the result of the review will be.
Shifting the branding of your annual review process and taking these three communication steps will do wonders!
By calling it an increase cycle, you could be creating entitlement. Rebrand the review and refocus.
2. Embrace Retro-Pay
You don’t have to get everything done BY January 1st in order to make all pay changes EFFECTIVE January 1st.
This year, rather than scrambling to hastily execute salary and performance reviews in December in order to have them out by January 1, conduct the review process in January:
- Jan 2-12: Salary and performance reviews carried out by HR & leadership
- Jan 15-19: Any resulting increases or bonuses confirmed and communicated
- Jan 22-31: All pay changes submitted to payroll and paid out by Jan 31, retro-active to Jan 1
If communicated well, leaning in to retro-pay could save you a little time and a lot of stress.
3. Stop Pro-Rating
Pro-rating base pay increases is falling out of fashion and has been replaced by factoring tenure in to eligibility. In the past, pro-rating was common practice in situations where all employees were eligible for increases. But, because a base pay increase is effective in the future, it is easy for that pro-rated pay to become demotivating: Why should an employee give 100 percent good effort when they’re only being awarded 50 percent of a potential increase?
It may seem counterintuitive that an employee would be better off being left out of the increase pool all together, but some research shows that one of the things that upset individuals most is feeling short-changed.
4. Plan for Obstacles
There are going to be hiccups; try to make sure they happen before anything gets to payroll. It won’t all work exactly as intended and that’s okay. Just be up front if something is going wrong. If you are at risk of missing a deadline, all is not lost, as long as you communicate early.
Tell Us What You Think
Have you made changes to your comp cycle? We want to hear from you. Share your story in the comments.
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