Whether it’s your first time running a merit cycle or your tenth, the process can feel like an uphill climb. You must expertly balance gathering accurate market data, managing employee expectations, and meeting deadlines, all while keeping other day-to-day operations afloat.
In this post, we’re sharing our expert advice to help you gear up for a successful merit cycle. Keep reading for five actionable tips to help you manage your next merit cycle.
1. Set a Clear Timeline for the Merit Cycle
A successful merit cycle hinges on a detailed project plan with well-defined milestones.
Most organizations run their merit cycle once or twice a year, and the process typically takes about three months. While there isn’t one correct approach to creating a timeline and managing deadlines, there are best practices to help you stay on track.
Here are three key recommendations on how to execute a timely merit cycle.
- Define the inputs needed for your merit cycle first. For example, if you pay based on performance, performance reviews must be completed before you can kick off your merit cycle.
- Align on budget with your executive team early in the process to avoid potential pushback later.
- Seed communication and training throughout the process. Sharing a steady stream of information throughout your merit cycle ensures important tasks and details stay top of mind.
And don't forget – expect the unexpected. The merit cycle process always takes longer than you think, so build as much buffer time as you can.
2. Define Merit Cycle Roles and Responsibilities
Merit cycles are complex to run, so it’s best practice to bring in all your stakeholders early on and ensure you have alignment on roles and responsibilities.
Typically, the following stakeholders are involved in the merit cycle process.
- Finance: They are responsible for setting the budget.
- Compensation team: Comp leaders typically own the end-to-end merit cycle project.
- HR or People Operations: While teams and roles vary, these are the people responsible for training and enablement, and partnering with managers, and managing merit cycle data and systems.
- Legal: This team typically helps review reward letters and anything equity-related.
- Executive team: Involve the C-suite throughout the process to ensure buy-in.
- Frontline managers: Managers directly communicate with their teams throughout the merit cycle process.
We recommend using a RACI chart to clearly define who is responsible, accountable, consulted, and informed. Doing so will help you effectively delegate and manage merit cycle tasks.
3. Use Your Compensation Philosophy for Guidance
Your merit cycle is one way to ensure you adhere to your compensation philosophy.
Your compensation philosophy serves as a guide when benchmarking employee compensation and evaluating their position relative to the market. It also informs the process of updating your salary ranges to ensure they align with your organization's pay strategy and goals.
You can also use the information in your organization’s compensation philosophy to define relevant compensation elements, determine eligibility requirements, and set merit effective dates.
There isn’t a one-size-fits-all approach here. Your philosophy as a company should inform every step of your merit cycle.
4. Train and Enable Your Team
Training, enablement, and communication are key pillars of any merit cycle. Start by defining your audiences and identifying how to best prepare them for the merit cycle. Determine who your different audiences are (employees, managers, executives) and the levels of enablement and training you need for each group to have a successful cycle.
Additionally, consider how you will present the information, as everyone learns in a slightly different way. It may be helpful to present merit cycle information in a variety of formats. For example, you can create written documentation and recorded videos that employees can consume on their own time. You can also incorporate merit cycle training into recurring team meetings or 1:1s.
It’s also necessary to equip managers with the tools they need to have conversations with their employees. Train your managers on what you want them to communicate, and crucially, what you don’t want them to communicate. Clear and effective communication ensures a more seamless merit cycle process.
5. Remove Bias With the Right Systems and Market Data
In preparation for your merit cycle, ensure you’ve completed the necessary market pricing exercises. Use accurate and relevant data to understand employee compensation today and what changes may need to be made during the merit cycle process.
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It’s also important to use a compensation management solution to reduce bias in the process.
Including recommendation logic and audit trails helps enable more streamlined merit cycle workflows. Recommendations anchor managers on reasonable merit increases, and audit trails help you better understand why past decisions were made.
Conquer Your Merit Cycle With Pave
Merit cycle season is often a stress-inducing time of the year, but it doesn’t have to be.
With compensation workflows from Pave, you can run more seamless merit cycles, all in one place. Pave makes it easy to refresh salary bands, set logic for employee increases, gather input from managers, and approve compensation changes.
Access Real-Time Market Data
Pave Market Data provides you with accurate and up-to-date compensation benchmarks from over 8,500 companies.
Learn more about Pave’s end-to-end compensation platform
