A compensation review ensures fair and competitive salaries and benefits for employees. Find out more here.
What is a compensation review?
A compensation review is the series of steps involved in assessing and potentially adjusting an organization's compensation strategy and structures. This process typically includes evaluating current salary levels, benefits, and incentives offered to employees.
It also involves analyzing market data to ensure that the organization's compensation is competitive and aligns with industry standards. A salary review may include reviewing internal equity to ensure that employees are fairly compensated relative to their roles and responsibilities within the organization.
What happens during compensation review?
During a salary review, an organization systematically evaluates its employees' salaries to ensure they are fair and competitive in the current job market. This involves comparing salaries and benefits to similar positions in the industry. Any necessary adjustments to the pay structure are made based on the review's findings.
Why is regular compensation review important?
Regular compensation reviews are important for an effective HR strategy because they offer many benefits. Here's why:
Competitiveness: Regularly reviewing salaries ensures competitive pay, which helps attract top talent and retain current employees.
Equity: These reviews identify and fix pay gaps, promoting fairness and equal pay for employees with similar experience and performance. This prevents resentment and dissatisfaction.
Motivation and performance: Regular reviews motivate employees by offering the possibility of a raise based on performance, encouraging them to work harder. They also allow for discussing performance expectations and how to earn future raises.
See AlsoMastering the Compensation Review Process: Essential Strategies for Fairness and Motivation | SalaryCubeCompensation Review Process | Actionable Steps & TipsConduct Effective Compensation Review: A Comprehensive GuideCompensation Review: The Complete Guide to Conducting Motivating Conversations | ZavvyLegal compliance: Regular reviews can help companies follow fair pay laws and avoid legal problems in regions with regulations on compensation.
Cost management: Regular reviews can control costs by ensuring fair pay and retaining talent, which reduces the need for costly recruitment and training.
Compensation Software accurately forecasts compensation for specific jobs in target markets using global market data, helping you with cost management.
Factors considered in a compensation review
The compensation review is the roadmap to ensuring fair and competitive salaries and benefits for employees. So, it's important to be thorough in considering these relevant factors:
Market data
Salary and benefit information for similar positions in the same industry and location, collected from surveys, job postings, and other sources.
Compensation Software provides access to HR-reported pay data for 15,000 job titles across 225 industries and 42,000 geographies.
Employee's performance
Employee performance is a key factor in the compensation review process, with strong performers potentially receiving higher raises or bonuses.
Role's market value
The compensation review considers the role's market value, taking into account specific skills, experience, and responsibilities needed for the role, not just the job title.
Location
Adjusting salaries based on the cost of living in different cities or regions.
With Compensation Software, you'll have access to the latest minimum wage data across the United States and stay updated on the most recent wages by states, cities, counties, and municipalities.
Company's budget
Raises and bonuses must fit within the company's compensation budget.
Overall industry trends
Economic and industry trends impacting salaries for in-demand jobs.
Steps for compensation review process
To create an efficient salary review process, follow these steps:
Identify your objectives for the review: Clearly state what you want to achieve with the review, such as aligning salaries, rewarding top performers, ensuring equity, or addressing retention.
Review current salary of employees: Gather and review current employee salaries, including base pay, bonuses, and other compensation.
Research market rates for similar job roles: Research current market rates for similar roles to understand how your compensation compares.
Calculate potential compensation adjustments: Based on goals and market research, calculate potential adjustments like salary increases or bonuses, considering performance and budget.
Implement changes: Once adjustments are approved, implement them in employee compensation and communicate them clearly.
Compensation review template
This template is your starting point. You may need to add or remove sections based on your organization's specific criteria.
FAQs
Below are the common questions related to salary review:
How often should salary reviews be done?
Regular salary reviews, not just annual ones, are important. They should happen throughout the year, alongside performance discussions, to ensure fair pay that reflects changes in an employee's role, market value, and contributions.
What is a salary review meeting?
A compensation review meeting is a formal discussion that assesses an employee's performance, current compensation, and market worth. It helps determine if adjustments are needed for competitive pay and to value the employee's contributions.
How do you negotiate salary review?
Negotiating your compensation means showing your achievements and researching your market value for a fair raise. Share this confidently with your manager, be open to discussing other forms of compensation, and stay positive and professional.
Boost your confidence in negotiating compensation reviews with Salary.com's Compensation Software, which provides accurate and up-to-date current market pricing information. This data is updated monthly by certified compensation professionals.
