How to Run a Compensation Review Process

A compensation review turns pay decisions into a controlled planning process. It should make eligibility, budgets, proposal ownership, review standards, approvals, effective dates, and payroll handoff explicit.

The process below is operational guidance, not compensation, tax, or legal advice. The US Equal Employment Opportunity Commission provides an overview of compensation discrimination. Have qualified advisers review the company’s criteria, analysis, communications, and location-specific obligations.

1. Define the cycle

Document:

• Cycle name and purpose
• Eligible employee population
• Review period
• Proposal and approval deadlines
• Effective date for approved changes
• Budget owner and currency rules
• Roles allowed to view, propose, approve, export, and apply changes

Do not begin manager proposals while eligibility and current compensation data are still changing.

2. Validate the starting data

For every eligible employee, confirm:

• Employee identifier and active status
• Job title, level, manager, department, location, and legal entity
• Current compensation amount, currency, and pay frequency
• Last compensation change where relevant
• Eligibility reason and any approved exceptions

Keep historical compensation separate from the proposed new amount. A proposal should not overwrite the live record before approval and the deliberate apply step.

3. Set budgets and guidance

Decide whether budgets are assigned by company, legal entity, department, manager group, or another approved scope. Guidance may include:

• Standard increase ranges
• Promotion treatment
• Market or retention adjustments
• Proration rules
• Currency handling
• Required justification
• Approval thresholds

Managers should know which inputs are guidance and which are mandatory controls.

4. Collect manager proposals

Provide managers with only the employees and compensation information they are authorized to review.

Each proposal should include:

| Field | Purpose | | --- | --- | | Current amount and frequency | Confirm the starting point | | Proposed amount or increase | State the requested change | | Effective date | Control when the change begins | | Reason category | Promotion, standard review, adjustment, or approved type | | Justification | Record decision-relevant context | | Proposal status | Draft, submitted, approved, rejected, or returned |

Avoid asking managers to include protected characteristics or irrelevant personal information in justifications.

5. Review consistency and equity

HR and authorized finance reviewers should examine:

• Budget use and exceptions
• Similar roles or levels under comparable criteria
• Outlier increases
• Differences by relevant organization group
• Promotion and market-adjustment consistency
• Missing or unsupported justifications
• Potential adverse patterns requiring qualified review

Analysis should support investigation, not automatically decide an individual outcome. Group sizes, role differences, geography, tenure, and other legitimate factors require careful interpretation.

6. Separate approval from application

Approval confirms the planning decision. Application changes the live compensation record and creates the payroll-affecting event. Keep them separate so an approved proposal can still be held, exported, or corrected before it changes operational data.

Use these states:

1. Draft
2. Submitted
3. Under review
4. Approved or returned
5. Applied to the compensation record
6. Included in the payroll handoff
7. Reconciled after processing

7. Communicate decisions

Prepare manager guidance covering:

• Approved amount and effective date
• How to explain the decision accurately
• What not to promise
• Where employees can ask questions
• How corrections or disputes are handled

Do not communicate until approvals, effective dates, and payroll readiness are confirmed.

8. Complete the payroll handoff

Applied changes should enter the monthly payroll change report with employee identifier, previous and new compensation, currency, frequency, effective date, approval state, and payroll group.

After payroll, reconcile every submitted change and correct the canonical record if the approved source data was wrong.

Cycle close checklist

• [ ] Eligibility frozen and validated
• [ ] Current compensation reconciled
• [ ] Budgets and guidance approved
• [ ] Manager access scoped
• [ ] Proposals complete
• [ ] Exceptions and equity checks reviewed
• [ ] Approval recorded separately from apply
• [ ] Employee communications prepared
• [ ] Payroll handoff accepted
• [ ] Post-payroll reconciliation complete

SalsaHR supports compensation cycles, manager proposals, HR and finance review, controlled approvals, exports, and a separate apply path into compensation history and payroll-ready changes.