5 key strategies plus when to bring in help

As the year draws to a close, organizations are faced with the critical task of year-end compensation planning. An effective planning process enables organizations to reward and retain their top talent while staying competitive in the market. It involves evaluating employee performance, assessing market trends, and making informed decisions about salary adjustments, bonuses, and other rewards. This process can be complex and time-consuming, requiring access to reliable data and industry insights. While experienced teams may not need expert guidance, an external view or independent assessment can be helpful in getting buy-in from leaders.

In this article, we’ll explore five key strategies for achieving year-end compensation planning success and highlight the significant benefits of partnering with a compensation consultant throughout the process.

1.Data-driven decision making

You want to base suggestions and decisions for your organization on accurate and up-to-date market data. Long gone are the days where we could determine someone’s compensation based solely on how much the last person in the role made.

By leveraging current market data, organizations can make informed decisions that align with market realities, optimize spend, and ensure competitiveness in attracting and retaining top talent. We’ve broken down some of the most important factors to consider when selecting salary surveys, but the process can undoubtedly seam overwhelming.

How can a consultant help? A compensation consultant can work as an extension of your team and help your organization further determine the appropriate surveys to rely on. They also can leverage their deep understanding of industry best practices and trends to help provide valuable insights and custom analyses that are tailored to your organizations specific needs.

2. Compensation budgets tailored to your organization

When it comes to setting next year’s compensation budget, resist the temptation to follow the crowd and instead consider the unique circumstances of your organization. Have you heard the saying “failing to plan is planning to fail”. It’s called compensation planning for a reason! To set budgets strategically, you will need to:

• Predict which job functions or skills may be in greatest demand and need more money
• Assess how the market has changed year-over-year for your specific jobs
• Understand how cost of labor might have changed in your locations
• Know where inequities exist and budget to address them in a timely manner
• Take control of “off-cycle” increases by focusing compensation investments on loyal and high-performing tenured talent
• Ensure budgets reflect the organization’s philosophy on merit-based pay increases

All these factors contribute to the budget that you choose to set based on your organization's compensation philosophy. They also assist in attracting and retaing top talent.

How can a consultant help? Not sure where to start? Don’t have a financial model to leverage? Don’t have clear compensation administration guidelines to inform decisions? These are all great reasons to reach out to a consulting partner. They can help by pulling market data and assessing gaps, highlighting where market pressures exist, and creating a process that you can replicate year-over-year.

3. A clear communication plan

Communication is vital to ensuring that employees understand the rationale behind compensation decisions. While most organizations aspire towards more transparency, the reality is that there is still a lot of work to be done.

It's also important that your managers are trained on how to have conversations about pay. This includes making sure managers understand how the organization determined the compensation philosophy, and what factors were used to determine salary structures and merit increase budgets.

How can a consultant help? A skilled consultant can assist your organization in developing clear and transparent communication strategies that will engage employees and manage their expectations, regardless of where you are in the pay transparency journey. Compensation consultants can be a great resource when training managers on how to effectively discuss pay and how to address employee concerns that are related to compensation.

4. Good governance

Compliance with regulatory requirements and governance standards is crucial during the compensation planning process. This may seem like an obvious step in the compensation planning process, but compliance can be tricky, especially when your organization operates in multiple states or countries.

How can a consultant help? A compensation consultant’s expertise in global and local compliance requirements will help your organization navigate complex compensation laws and regulations. They can conduct a compliance audit with the goal of uncovering issues of non-compliance. They can perform a pay equity analysis to ensure employees are being paid fairly, and they help communicate compensation related issues to shareholders and board members. A consultant will help limit compliance risks and help to build trust from your employees by ensuring fairness, transparency, and adherence to best practices.

5. Ongoing evaluation and optimization

Year-end compensation planning is not a one-time event but rather an ongoing process. Organizations need to be proactive in addressing challenges and make sure they are staying competitive and aligned. Monitoring market trends, assessing the effectiveness of processes and teams, and adjusting when needed are all apart of the compensation planning process.

How can a consultant help? A compensation consultant can help with ongoing evaluation and optimization to ensure that compensation plans are effective, competitive, and aligned with organizational goals. The labor market is constantly changing and a compensation consultant can work with you to more efficiently evaluate and optimize your compensation strategies, including building AI-driven platforms to streamline administrative tasks and fix inefficiencies.

Unlock success with Mercer's support

As you embark on the year-end compensation planning season, consider engaging a compensation consultant like Mercer. By leveraging data-driven decision making, customized compensation strategies, effective communication, compliance expertise, and ongoing evaluation, organizations can optimize their compensation plans and achieve desired business outcomes. With Mercer as your trusted partner, you can navigate the complexities of compensation planning and create a rewarding employee experience that drives organizational success.

Ready to meet your Mercer Compensation Consultant? Give us a call at 855-286-5302 or email us for to get connected today.

About the Authors

LaCinda Glover is a Partner in Mercer’s Career business and specializes in total rewards. LaCinda has been with Mercer for over 18 years. In addition to her consulting role, she is the Career Practice Leader for Kentucky and Tennessee and works in a variety of industries.