Guide to prepare your upcoming compensation review

Preparing for the next salary review cycle, or tackling your first one, can feel overwhelming. But with the right approach, you can make the process smoother and more rewarding for everyone involved.

Effective compensation planning plays a central role in acknowledging employee contributions. That said, when handled manually, it often becomes a lengthy and complex process with multiple stakeholders, endless meetings, and heavy administrative work.

At Heyquity, we focus on simplifying how organizations run compensation reviews through automation and smart data management. Still, if you’re handling things manually this year, here’s a clear step-by-step guide to help you design and manage your cycle efficiently.

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Main steps

Planning a compensation cycle is a great responsibility as it involves multiples persons within the organisation (from the CEO to Managers and HR team).  

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1. Reflect on the previous cycle

Start by looking back at what worked, and what didn’t, during your last compensation review. Evaluate your outcomes, goals, and challenges. Decide what your main focus will be this time: improving retention, aligning pay scales with new policies, or achieving both.

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2. Gather and verify key data

A successful review depends on clean, accurate information. Ensure your data is current and complete for each employee, covering:

• Employment details such as role, location, and job level.
• Performance data (ratings, goals, or feedback scores).
• Compensation details from the last and current year.
• Salary ranges or grids, if your company uses them for internal equity.

Keeping this data updated will give you a solid foundation for fair and transparent decisions.

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Compensation Ranges: If your company uses compensation ranges to ensure internal equity within peer groups, it is always good to check if your grid is up-to-date. It will be useful in your review.

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3. Define eligibility criteria

Establish clear rules to determine which employees qualify for a salary review. Typical factors include:

• Minimum tenure at the company.
• Employment status (e.g., permanent vs. temporary).
• Time since last salary increase.

Doing this upfront removes ambiguity and ensures consistency across departments.

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4. Define your main increase recommendations

Managers should know exactly how to assess and reward performance. Define well-structured guidelines based on measurable criteria—such as performance ratings, potential, or career growth.

For instance:

• Employees requiring more development might receive modest increases aligned with inflation.
• Solid performers might get standard raises within budget parameters.
• Top performers could earn higher increases or promotions to reflect their impact.

Use inflation data, growth targets, and budget constraints by region to anchor these decisions.

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Example

• For people considered as needing more development, you may decide to apply a minimum increase based on location inflation rate.
• For people in the medium spectrum, you may decide to apply a percentage based on a budget you are comfortable for the location and based on your growth rate.
• For the top-tier performers, you may want to consider applying a X factor to the standard increase rate to show your recognition.

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To define the right percentage for each ratings, yo can collect data around inflation rates (for minimum increases), growth rates and budget allocated by location.  

For top performers: You may want to promote them to the next job level and associate a minimum increase as well.

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5. Address pay imbalances

Review compensation data to identify employees whose salaries fall below internal benchmarks or who haven’t received an adjustment in years. Investigate whether the gaps are due to performance, role changes, or other factors, and correct inequities where necessary.

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6. Streamline approvals

Tracking approvals can be one of the most time-consuming parts of a review. Set up a clear validation workflow and maintain documentation of all recommendations and approvals. This ensures accountability and prevents confusion during final adjustments.

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7. Communicate your approach

Transparency fosters trust. Align managers around your compensation philosophy early in the process. Host sessions with HR business partners and department heads to discuss guidelines, budgets, and expectations. This preparation will help managers explain decisions clearly to their teams later on.

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Heyquity Makes Comp Reviews Much Easier

Managing salary reviews manually is possible, but far from ideal. Heyquity helps you automate every step, from data collection to approval tracking, bringing all information together in one place. The result? Faster decisions, fewer errors, and more time for meaningful strategy.

If you’re still juggling spreadsheets, it might be time to upgrade. With Heyquity, you can coordinate efficiently, share real-time insights, and stay focused on rewarding the people who make your organization thrive.