Reviewing the Compensation Review Process: A Guide for HR Teams

For HR and compensation teams, the annual compensation review is one of the most important moments of the year. But what do you do when it’s all over? 

First, take a deep breath and congratulate yourself on a job well done. Leading an organisation-wide review is no small feat, and it’s worth pausing to appreciate your team’s achievement. 

But once you’ve celebrated, it’s time to shift gears and reflect on the review you’ve just conducted. What went well? What could have been better? How can you make the process smoother, fairer and more efficient next time around? 

Thoroughly reviewing your processes can help set your organisation up for long-term success by ensuring each compensation review you run is better than the last. We’ll walk you through the process step by step in this article. 

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Why you need to review your compensation review process

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Reflecting on the success and challenges of your compensation review helps you to make the process better, smoother and more impactful in future cycles. By identifying roadblocks and inefficiencies, you can save your HR and compensation team from unnecessary stress and frustration next time around. You’ll also make the process smoother and easier for managers and employees alike. 

But it’s not just about efficiency. Regularly reassessing and fine-tuning your process ensures compensation decisions remain fair, consistent and objective. This is key to fostering employee trust, which directly influences engagement, satisfaction and even retention. When employees feel confident in the fairness of pay decisions within your organisation, they’re more likely to stay motivated and committed for longer. 

Finally, reviewing your process ensures it’s aligned with your organisation’s compensation philosophy and strategic goals. This turns compensation into a powerful tool for driving business success — all while fostering a culture of fairness and trust. 

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A step-by-step guide to reviewing your compensation review process

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Taking the time to review your compensation process isn’t just about checking boxes. It’s about building a system that’s efficient, fair and aligned with your goals. By assessing the people, processes and tools involved in your compensation reviews, you can pinpoint what’s working, uncover problems and create a culture of continuous improvement. 

Ready to put your compensation review process under the microscope? Here are the steps to follow. 

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1. Diagram your process and identify inefficiencies

Compensation reviews can get pretty complex. And inefficiencies can be hard to spot when you’re in the thick of it. One of the simplest ways to identify issues is to create a visual map of your entire process using a tool like Miro or Lucidchart. Seeing the whole process laid out in this way makes it much easier to spot bottlenecks, redundancies and areas where things tend to slow down. That gives you a solid starting point for making improvements to your process.

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2. Consider key metrics to assess the success of the process

Reviewing your compensation review process is about determining whether or not the cycle was successful. But ‘success’ looks different for every organisation. To assess your process objectively, you need to consider key metrics that you track over time. Here are three essential metrics to look at: 

• Budget adherence: A simple question: did you stick to your salary increase budget, or were increases way out of line with your expectations? Staying on budget demonstrates strong processes and indicates that decisions are guided by predefined criteria. As well as keeping an eye on your global budget, analyse spending by categories like merit increases vs. promotions or break it down by department, level or location.

• Cycle timelines: Compensation reviews require weeks of preparation, coordination and communication. And, because so many stakeholders are involved, even a short delay could have a knock-on effect. If you’re not careful, you could end up missing your deadline — which can be frustrating for managers, employees and HR. Considering how well you stuck to your planned timeline can help you to improve your process for next time. If your review took way longer than expected, it could be a signal to build in extra time or simplify certain steps. 

• Adherence to compensation philosophy: Compensation reviews are about putting your overall compensation strategy and philosophy into action. But if you’re not careful, you can end up making decisions that are misaligned with those core beliefs and guidelines. One way to verify alignment is to check the percentage of employees positioned within their salary band after the review. A high percentage reflects a strong alignment; a lower one may indicate issues with the process or your overall salary structure.

Once your review is complete, consider turning metrics into actionable targets by setting KPIs for your next review. For example, you might set a target of completing your reviews on time, with at least 95% of your employees positioned within band after the review. 

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3. Survey managers and employees 

Of course, numbers only tell part of the story. Like everything in HR, compensation reviews are fundamentally a human process. Gathering feedback on the process from managers and employees can reveal blind spots and provide insights you may not have considered. 

Use anonymous surveys or focus groups to answer questions like: 

• Did employees feel that the performance feedback they received was useful?
• Did managers feel equipped to talk to their reports about performance and compensation?
• Do employees understand the reasons behind their adjustments?
• Did everyone believe the process was fair? 

Collecting and analysing this feedback sets the stage for continuous improvement by giving you a baseline for future targets. For example, you might consider a compensation review to have been successful if: 

• At least 80% of employees believe the results are fair
• At least 95% of managers feel confident discussing compensation 

This is just an example — take the time to consider what success should look like for your organisation. 

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4. Prepare and share statistics with stakeholders

After a compensation review, leadership and senior stakeholders want to understand the big picture. While they might not need to know every detail, they’re interested in how the review impacted the organisation and what adjustments to the process are needed. 

Preparing clear, actionable statistics helps secure buy-in and builds credibility for your team. There are many different statistics you could collect here, but here are some basics to include: 

• Total % increase to overall salary spend 
• % of eligible employees who received a raise or promotion
• % budget given to promotions vs. raises 
• Median salary increase for employees who received a raise or promotion 
• Gender pay gap before and after the review 

While calculating and collating these statistics can be time-intensive, tools like Figures can simplify the process by providing real-time analytics as you conduct your compensation review. This both saves time and ensures accuracy when presenting your findings to leadership. 

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5. Reflect and discuss with your team 

After you’ve gathered all of the relevant feedback and data, it’s time to sit down with your team and reflect honestly on what you’ve learned. To summarise, that means asking yourself questions like: 

• How was the process for managers and employees?
• How closely did we stick to our budget and meet our timelines? 
• Were compensation guidelines consistently followed? 
• What parts of the process could be improved?
• Are we using the best tools possible to support our process? 

All of this should help you determine which parts of your process are working well and which parts you should change for the next time. Of course, you may not be able to completely overhaul your compensation review process all at once. Categorising issues as ‘urgent’, ‘important’ or ‘long-term’ can help you to prioritise. 

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Try Figures for smoother compensation reviews

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For a long time, Excel has been the tool of choice for compensation reviews. And while the program has its advantages, there are also some major drawbacks. Most notably, creating, editing and updating spreadsheets manually takes a lot of time. There’s also a big potential for human error: one misaligned column or accidentally deleted figure can cause a big headache. 

We created our compensation review module to give HR and compensation managers a better way to handle compensation reviews. Using our tool, it’s easy to set up a campaign, create consistent, repeatable processes and collaborate with all stakeholders in a secure, accessible environment. 

The best part? Figures is not just a program for compensation reviews — it’s a comprehensive suite of tools, rolled together in one intuitive platform. You can use it to: 

• Benchmark salaries against real-time market data
• Generate salary bands for your entire organisation
• Prepare for compliance with pay transparency legislation

Want to learn more? Sign up for a demo to see it in action. 

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