Instead of scrambling at the 11th hour to pull together a lackluster compensation plan, sometimes the best thing to do is take advantage of the slower months to give yourself extra time. In today’s complex labor market, having a competitive compensation plan and strategy is imperative, and taking valuable time to strategize will allow you to get it right the first time and head into the new year with a strong compensation planning process.

What is compensation planning?

Compensation planning is a yearly process of creating and implementing a structured approach to determine how employees are paid and rewarded for their work within your organization. The goal is to build a compensation plan that aligns employee compensation with the organization's goals and performance, along with the current labor market conditions.

Determining whether your base pay, salary ranges, benefits, and other direct and indirect compensation offerings are competitive is imperative. However, you first need to define your organization’s compensation philosophy, which will help your compensation planning season flow much more efficiently.

Six things you can do now

With a compensation philosophy in place, you can create and fine-tune your compensation plan annually by following these six tips from the experts at Mercer as you prepare for your annual compensation review.

1. Collaborate with key stakeholders

Compensation structure and total rewards programs impact your entire business. If you lack an attractive compensation plan, you will have more challenges securing the employees you need. The resulting chain reaction may ultimately prevent your organization from achieving its objectives.

While it might be tempting to lighten up the workload a bit during the slower months of summer, you’d be better off using these months to collaborate with the business’s stakeholders. This includes everyone from department managers, executive leadership, finance professionals, recruiters, and other members of the human resources and compensation management teams.

Consider allotting about 30–45 minutes during the slower months to meet with stakeholders and have a meaningful conversation about what is working and where they may see room for improvement in terms of compensation.

David Kopsch, GRP, a senior principal with Mercer, says it best: “Put your ear to the ground! Connect — internally with Finance and the Business, and externally with trends/data and consultants!"

Meeting with your stakeholders will not only help identify opportunities for improvement, but it will go a long way toward developing your credibility and network.

2. Evaluate survey usage and data needs

Joe Ziomek, a trusted Mercer partner, recommends that “As salary surveys are about to be released, now’s the time to start updating your job matches to salary survey jobs. You can update your salary structures now, too, for next year.” Doing the modeling and testing now will take one thing off your plate before you become fully immersed in the compensation planning process.

Operational needs, job performance duties, and the nature of the business itself change over time. The surveys that you utilize to build a desirable and market-competitive total compensation package may need to change to match the current needs of your organization.

A best practice is to review the salary surveys you are currently using and identify if there are any data gaps. Getting total compensation rightis the best way to attract and motivate the employees you need.

In addition, your matches to survey jobs may change over time. It’s a good idea to review your job mapping regularly as a way to adjust for changes and incorporate new jobs. Sure, you’ll still have to make some adjustments once the new data comes out, but why not give yourself a head start?

3. Get your HR information systems team involved now

Having a robust amount of salary and compensation data is great, but make sure your HR information systems (HRIS) are all up to date. Preparing your HRIS system for the compensation planning season always seems to take longer than planned, leading to last-minute changes and increasing the possibility of errors.

“Getting the HRIS system ready is a heavy lift and usually one of the more challenging points” remarks Muriel Taing, a Mercer principal. Minimize the risk by connecting with your HRIS team now to plan out the process and identify timelines and accountability, data needs, and interface points.

Need Salary Survey Data?

To evaluate pay and design competitive offerings, you can start by using survey data from the Mercer Benchmark Database, which provides salary data on over 6,800 positions. You can purchase the entire database — or the module most relevant to your industry.

See how Mercer can help you deliver on this initiative

4. Identify which job families need special attention

We recommend creating a schedule for this review process to ensure that each job family gets the attention it needs. It’s best practice to review your most highly populated job families annually and put others on a rotation every few years.

When reviewing job families, look for things like the average compa-ratio and whether employee pay is falling outside the ranges. In addition, talk to recruiters and HR Business partners and see if they are experiencing difficulty in hiring or retaining employees in any of the roles. Identifying jobs that have been difficult to market price is also something to watch for when fine-tuning your market pricing and compensation planning.

5. Refresh and revise communication and guides

Dust off all the communications from last year and see what you can refresh and update for this year’s process. Though there may still be some unknowns, much of what will take place this year and what you need to communicate with managers and employees will be similar. Getting the communication plan in place while you have some time to focus on the details will result in delivering clear and concise messages about compensation.

6. Create a wish list for the new year

The “official” compensation planning process likely begins a few months after summer ends, or 3–4 months prior to the start of your fiscal year. Make your annual compensation planning more effective by planning for it now.

Start by coordinating with the departments you assist. Based on your one-on-one check-ins, you should have an idea of their needs and how you can support them and their workload.

Budget time and resources now to enable them to be successful. At the same time, commit to timelines with your colleagues while also setting realistic expectations. Then use this information to demonstrate what resources or budget you need for the next fiscal year. By relying upon facts and figures communicated to you by the business’s constituents themselves, you can present a powerful argument to the financial team.

Finally, design an annual calendar that sets you up for success. You’re already aware of numerous activities that recur annually, so schedule those first.

Reach your annual compensation planning goals with Mercer.

Mercer’s suite of data-powered products are designed to inform your compensation planning and annual budgeting needs. Products like Mercer’s Salary Surveys will enable you to get the information necessary for constructing logical pay structures and identifying top talent. It may also be helpful to engage with a dedicated compensation consultant who can help your organization efficiently reach your planning needs.

Call us at 855-286-5302 or e-mail us at surveys@mercer.com to get started planning ahead for a smooth and efficient compensation planning season.