Compensation & Review Process
The compensation strategy can make or break a high-performance organization; you should strive to pay above market average to get and retain above-average talent
Gathering and maintaining compensation benchmarks across roles, seniorities and geographies is important to ensure you're paying the right price for talent
A standardised pay review process with clear rules around how salaries are adjusted will set the right expectations and save management time
Paying the right price for talent
To secure top talent you need to pay the right price
Data Engineer
- Maintain compensation benchmarks by role and seniority to understand what you should be paying for talent
- Reward key talent with competitive salaries; compensation should be above the median benchmarked salary for important roles
- Benchmark the bonus potential as well, not just the base
We believe that to get above-average talent you need to pay above average price. Compensation is benchmarked above the median for key roles, to ensure a competitive offering.
To identify the correct levels, a benchmarking process should be in place. The performance team is responsible for maintaining benchmarks. Some key guidelines:
- Maintain data on every role - for each position, there is a matrix covering location, seniority and bonus vs base salary
- Use multiple sources and aggregate them into a single framework that fits your organisation - many companies conduct compensation surveys, so pick the ones that best cover your roles and location; some examples can include (some examples include AON Radford, Korn Ferry, Mercer, Ravio, Figures and others)
- Review benchmarks periodically - all benchmarks should be updated once a year but one-off requests may also come in from recruiters when they are hiring for a new role or location
Example - Matrix for an Engineer
75th Percentile - Salary / Bonus %
75th Percentile - Salary / Bonus %
Pay review process
Save management time by standardising the pay review process
Promoted employees
- Automatic matching to new seniority benchmark after promotion
A-players
- Eligibility for salary review
- Matching to benchmark if salary is found to be below benchmark
All employees
- General review to adjust salaries to market conditions
- Changes made on discretionary basis only if there is significant deviation from benchmark for entire categories
Pay reviews can be a source of distraction for management when ad-hoc requests come in and managers need to decide how to reward and by how much. A general, periodic pay review can help address that, while setting clear expectations for employees.
The pay review policy should vary by the status of the employee:
- For promoted employees, pay increases automatically to match the new seniority
- For A-players who did not receive a promotion in that year, a salary review is completed with the pay adjusted to match the benchmark if it is found to be below it
- For everyone else, a general review is done annually to adjust for market conditions
- The bar is very high to increase salaries through this process, and it requires showing significant deviation from the benchmark for entire role categories
- General inflation is normally not a sufficient justification
Situation: Alice, an engineer, has been promoted from Mid to Senior. His salary is $100k, significantly below the benchmark for his role and location, which is $125k.
Pay review result: Automatic increase in salary to $125k to match the benchmark. Alice is an A-player, which is recognised by a promotion. The new salary should match the market rate in order to ensure retention.