Create a Compensation Cycle
Learn how to create a new compensation cycle.
Prerequisites
- Load employee data. For more information, see Smart Compensation Data Requirements.
- Optional: Configure cycle settings. For more information, see Cycle Settings.
Create a new compensation cycle
- Click New cycle.
- Provide cycle details. For more information, see Provide cycle details.
- Click Create.
Provide cycle details
Set up a new compensation cycle by capturing all the key details you'll need. The table below describes each element you will need to provide during cycle creation.
|
Set up element |
Description |
|---|---|
|
Details |
Provide cycle name, description, pay types, effective dates, and add collaborators. You can also choose whether or not to include promotions. |
|
Setup |
Set a snapshot date, cycle currency, and select a budgeting method. For more information about which budgeting method to select, see Which budgeting method should I choose? |
|
Eligibility |
Add rules to define eligibility criteria for base pay, bonus and/or LTI. You can also manually include or exclude individual employees. |
|
Base Pay |
Set a budget and define a holdback for base pay. This step is only included if you selected base pay as a pay type in cycle details. |
|
Bonus |
Set the bonus period and define a holdback for bonuses. This step is only included if you selected bonus as a pay type in cycle details. |
|
LTI |
Set the price per share and define a holdback for LTI. This step is only included if you selected LTI as a pay type in cycle details. |
Which budgeting method should I choose?
When you set up a compensation cycle, you'll need to decide how to give budget to your managers. You can choose between a uniform budget or a flexible budget. Your choice should depend on your organization's culture and how you handle performance reviews.
Uniform budget
With a uniform budget, every manager receives the same amount of money per employee in their group, regardless of performance ratings or current pay. For example, you might give each manager enough to provide every team member with a 5% raise.
- Choose this if: You want a simple, predictable budget. This is a good choice if your organization has a strong, top-down approach to compensation and you prefer to keep manager-level decisions straightforward.
- Considerations: With a uniform budget, managers might not get the exact budget they need. For example, your pay philosophy might recommend a 10% raise for top performers, but a manager with a high-performing team may not have enough budget to follow that guidance. Therefore, they might see that they are over budget. Conversely, a manager may have too much budget for an average-performing team and might give out raises that aren't necessary.
Flexible budget
A flexible budget gives each manager the exact amount of money needed to fund the recommended raises for each employee on their team. The budget is directly tied to the pay philosophy you've configured. If an employee is a top performer and is recommended a 10% raise, that specific amount is included in the manager's budget.
- Choose this if: Your managers are fairly consistent with their performance reviews. This approach ensures managers have the exact funds they need to follow the pay philosophy, making the process smoother and more aligned with your strategy.
- Considerations: A flexible budget can lead to different departments getting a disproportionate share of the budget if some managers are consistently more generous with their ratings than others. This option works best if you have a reliable process for scaling performance reviews across the organization.