Steps to Run a Salary Review Cycle This Quarter

For HR professionals, compensation and benefits leaders, and business managers, running a salary review cycle is one of the most critical responsibilities of the quarter. A well-structured salary review not only ensures fair and equitable pay but also strengthens employee trust, engagement, and retention. Done right, it aligns compensation with performance, market benchmarks, and organizational strategy.

This quarter, many companies are facing inflationary pressures, competitive talent markets, and heightened employee expectations. A salary review cycle provides the structured framework to address these challenges and deliver clear, transparent outcomes. Below are practical, step-by-step guidelines to help HR teams execute an effective quarterly compensation review.

1. Review Compensation Philosophy and Objectives

Before diving into spreadsheets and benchmarks, begin by revisiting your compensation philosophy. This is the guiding principle that defines:

Market positioning (e.g., lead, lag, or match the market)

Reward criteria (performance, tenure, skills, or potential)

Alignment with business goals (cost control, talent retention, or equity corrections)

Clarify this quarter’s specific objectives. Are you focusing on retaining top performers, correcting internal pay inequities, or responding to external market shifts? Aligning objectives upfront ensures consistency in decision-making and keeps managers focused on outcomes.

2. Preparation, Data Collection, and Timeline Planning

Salary reviews are not one-day events—they require structured preparation. HR leaders should set a clear timeline that spans several weeks, with checkpoints for data collection, analysis, and calibration.

Key preparation steps include:

Collect market data from salary surveys, compensation benchmarking platforms, and competitor job postings.

Review internal data such as job levels, pay histories, and promotion patterns.

Define scope by confirming which employee groups are included in this cycle (e.g., full-time staff, specific functions, or leadership roles).

Assign responsibilities to HR, finance, and line managers for each stage.

Pro tip: publish a salary review calendar early in the quarter so stakeholders know what to expect.

3. Employee Performance Evaluation

Merit-based pay decisions must rest on consistent, transparent performance evaluations. HR should:

Gather recent appraisals and 360° feedback.

Incorporate self-evaluations where available.

Validate that performance ratings are calibrated across teams to avoid rating inflation or bias.

Performance data is the foundation for merit increases, promotions, and variable pay recommendations. Inconsistent evaluation processes undermine trust and lead to disputes.

4. Market Benchmarking and Gap Analysis

Once data is in hand, HR should conduct a market competitiveness check:

Compare current salaries to market medians and percentiles.

Identify roles where pay is significantly below market (risk of turnover).

Detect roles that may be overcompensated relative to peers.

Flag internal pay inequities across gender, tenure, or departments.

Using the right tools makes this step more efficient. Platforms like the TalentUp Salary Benchmarking Platform provide real-time, global compensation data that helps HR leaders compare salaries across industries, roles, and locations. By leveraging TalentUp, you can move beyond static surveys to dynamic insights that reflect current market shifts—critical in today’s fast-changing labor environment.

The results of this analysis form the basis for targeted salary adjustments and ensure decisions are backed by accurate, competitive data.

5. Budget Planning and Affordability Assessment

Even the best-intentioned salary adjustments must fit within budget. Partner with finance to:

Define the overall budget envelope for salary increases.

Model different scenarios (e.g., 3%, 4%, or 5% pool increases).

Allocate funds strategically to priority roles or retention-critical employees.

Budget modeling ensures that salary reviews strengthen retention and competitiveness without creating financial strain.

6. Manager Training and Calibration

Line managers are the bridge between HR policy and employee perception. To ensure fairness:

Train managers on the compensation philosophy and guidelines.

Run calibration sessions where leaders review proposed increases, identify outliers, and align on standards.

Provide managers with talking points and FAQs to guide employee conversations.

Calibration prevents discrepancies across teams and reinforces a culture of equity and consistency.

7. Approval and Implementation

After calibration, secure cross-functional sign-off from HR, finance, and executive leadership. Once approved:

Update HRIS and payroll systems with new salary data.

Generate formal salary review letters or notifications for employees.

Ensure compliance with any local labor regulations on pay adjustments and communication.

Efficiency at this stage avoids payroll errors and employee confusion.

8. Transparent Employee Communication

Compensation decisions are highly personal, so communication matters as much as the raise itself. Best practices include:

Having managers deliver the news directly in one-on-one conversations.

Explaining the rationale behind adjustments (performance, market alignment, or equity).

Offering resources for questions, such as HR office hours or FAQs.

Employees who understand why decisions were made are more likely to view them as fair, even if the increase is modest.

Discover TalentUp salary platform 💡

Get any salary for any location.
Real-time trustwhorty salary data.

9. Continuous Improvement and Follow-Up

A salary review cycle is not complete without reflection and feedback. After this quarter’s cycle:

Gather input from managers and employees on what worked and what didn’t.

Track outcomes such as turnover rates, employee satisfaction, and market competitiveness.

Refine the process for the next cycle, adjusting timelines, data sources, or communication strategies.

Over time, these iterations will produce a more effective, efficient, and trusted compensation review system.

Sample Salary Review Cycle Timeline (8–10 Weeks)

Week 1–2: Planning & Data Gathering

Reconfirm compensation philosophy and objectives for the quarter.

Define scope: employee groups, functions, and pay elements under review.

Collect external market data (using tools like TalentUp Salary Benchmarking Platform).

Pull internal pay data, performance ratings, and historical increases.

Publish the review calendar and assign responsibilities.

Week 3–4: Performance Evaluation & Benchmarking

Finalize and validate employee performance ratings.

Conduct market benchmarking to identify pay gaps.

Draft preliminary adjustment recommendations based on performance and market alignment.

Week 5: Budget Modeling

Align with finance on available salary review budget.

Model various increase scenarios (e.g., across-the-board vs. targeted adjustments).

Prioritize roles critical to retention or business continuity.

Week 6: Manager Training & Calibration

Train managers on process, philosophy, and guidelines.

Conduct calibration meetings to ensure fairness and consistency.

Resolve outliers or discrepancies in proposed adjustments.

Week 7: Leadership Approval

Secure final approvals from HR, finance, and executive leadership.

Confirm compliance with legal requirements (pay equity, local regulations).

Week 8: Implementation

Update HRIS and payroll systems.

Generate and review employee salary adjustment letters.

Prepare talking points and FAQs for managers.

Week 9–10: Communication & Follow-Up

Managers hold one-on-one meetings with employees to share salary decisions.

HR provides support channels for employee questions.

Gather feedback from managers and employees to improve next quarter’s cycle.

Tips for Running an Effective Salary Review Cycle

To maximize impact this quarter, HR professionals should:

Use consistent data and criteria to reduce bias.

Engage employees through surveys or feedback loops.

Share a clear timeline with all stakeholders upfront.

Proactively communicate results and provide transparency at every stage.

Why a Strong Salary Review Process Matters

A structured quarterly salary review process is more than just a compliance activity—it’s a strategic HR tool. By ensuring fair, competitive, and transparent pay practices, organizations can:

Boost employee satisfaction and retention

Maintain market competitiveness in tight labor markets

Build trust in HR and leadership

Demonstrate commitment to equity and fairness

In today’s environment, where talent has more choices than ever, compensation clarity is not optional—it’s essential.

Final Thoughts

Running a salary review cycle this quarter requires discipline, data, and transparency. From revisiting your compensation philosophy to leveraging platforms like TalentUp Salary Benchmarking Platform, each step strengthens employee trust and organizational alignment.

When HR and compensation leaders approach the process with structure and fairness, the payoff is significant: engaged employees, reduced turnover risk, and a compensation strategy that supports long-term business growth.

Compensation

Cookie Settings

Your message has been sent.