Year-End Compensation Planning: Where Should You Start?
Reading Time: 5 minutes - A useful starting question for compensation planning: what should we be paying employees for the work they perform?
- Start by reviewing job descriptions and career levels, since roles often change faster than documentation does.
- Benchmark against a peer group that actually reflects your industry, geography, and company size, not a generic market average.
- Review where employees fall within your pay ranges for compression, inconsistencies, and pay equity concerns.
- Starting early gives you time to work through budget, compliance, communication, and system readiness before deadlines force the decisions.
Compensation planning can feel like a big project before you’ve even begun.
You may know your organization needs to review pay. You may have concerns about competitiveness, retention, or pay equity. You may also be working with outdated salary ranges or roles that have changed significantly since the last review.
The challenge is knowing where to start.
A useful first question is simple: what should we be paying employees for the work they perform? Answering that question gives you a foundation for the decisions that follow, and it can also reveal where your compensation program needs more attention. Here are the areas to review as you begin year-end planning.
Start with the work
Before reviewing individual salaries, make sure you understand the work those employees are actually doing.
Roles change. Responsibilities grow. New skills become necessary. Job descriptions do not always keep up.
Review your current job descriptions, responsibilities, career levels, and qualifications. Ask:
- Does the job description still reflect the role?
- Are employees doing work beyond the scope of their current role?
- Are similar roles structured consistently?
- Do your career levels reflect how work has evolved?
This gives you a stronger foundation for evaluating pay.
Understand what the market says
Once you have a clear picture of the work, look at what the market is paying for it.
Market benchmarking can help you determine whether your compensation is competitive and where adjustments may be needed. But the quality of the comparison matters.
Your peer group should reflect the organizations you actually compete with for talent. Consider factors such as:
- Industry
- Geography
- Company size
- Revenue
- Workforce characteristics
The right benchmark can also change depending on the organization’s size and complexity. Employer Associations of America’s 2026 National Executive Compensation Survey found that some organizations with more than $500 million in sales reported total CEO cash compensation above $700,000, while some organizations with less than $5 million in sales reported compensation below $200,000.
Company size matters. Your benchmark should reflect the organizations you are actually competing with for talent.
Look at where employees fall within your ranges
Market data tells you what the market is paying. You also need to understand how your own employees are positioned.
Review where employees fall within your salary ranges and pay grades. Look for:
- Employees paid significantly below or above the range
- Compression between employees at different levels
- Inconsistencies among employees doing similar work
- Potential pay equity concerns
- Employees whose pay may no longer reflect their role or contribution
This can help you determine where targeted adjustments may be needed.
Build or refine your pay structure
If your salary ranges are outdated, inconsistent, or difficult to explain, year-end planning can be a good time to revisit your pay structure.
That may mean creating new salary ranges, adjusting existing grades, or refining how roles are grouped.
A well-defined structure can give managers a clearer framework for making pay decisions. It can also help employees understand how their compensation relates to their role and career progression.
The goal is to create a structure that makes sense for your organization and can support the decisions you need to make.
Think beyond the salary range
Compensation planning does not stop with base pay. Once you have reviewed roles, market data, and employee positioning, you may uncover other areas worth addressing.
Do employees understand how they can progress? Clear career paths can help employees see what development looks like within the organization. They can also help your organization identify the skills and competencies needed at each level.
Review your benefits, retirement programs, paid leave, flexible work arrangements, incentives, and other rewards. Then consider how your overall package compares with the market. Long-term incentives can also be part of the picture, particularly for senior roles: the 2026 National Executive Compensation Survey found participation rates of 18 to 19 percent among CEOs and C-suite executives, compared with 9 to 10 percent among directors and managers. If retention is a concern, consider whether your current mix of compensation and rewards supports the people you most need to keep.
Your compensation strategy should also reflect where your organization is going. Which roles will be difficult to fill? Which skills are becoming more valuable? Where are you seeing retention risks? These questions can help you decide where compensation investment may have the greatest impact.
Do not forget the rest of the compensation cycle
Once you have established a foundation, you still have several decisions to work through, from budget scenarios and pay equity to manager training, system readiness, and post-implementation review.
That is why starting early matters. The more time you have to work through these decisions, the less likely you are to find yourself making important compensation decisions at the last minute.
Strategic Compensation Planning Starts Now
Eight phases of the compensation cycle, from foundational data and market benchmarking to talent strategy, communication, system readiness, and post-implementation review. Use it to identify gaps and organize your priorities before you set next year’s pay.
Compensation planning does not have to start with everything
You do not need to solve your entire compensation strategy in one sitting. Start with the fundamentals.
What are your roles worth in the market? Where are your employees positioned today? Does your current structure support where your organization is headed?
The answers can point you toward the next decisions that need attention.
Ready to work through your compensation plan?
You do not have to work through every compensation question on your own. Catapult’s compensation consultants can help you benchmark pay, build salary ranges, and address pay equity, whether you need support on a specific project or a partner across the full compensation cycle.
Compensation planning takes effort. Starting with the right questions makes it more manageable.
When should year-end compensation planning start?
As early as possible. Starting early gives you more time to work through budget scenarios, pay equity review, manager training, and system readiness before decisions have to be made at the last minute.
What is the first step in compensation planning?
Start with the work itself. Review current job descriptions, responsibilities, and career levels before evaluating pay, since roles often change faster than the documentation describing them.
How does Catapult help with compensation planning?
Catapult’s compensation consultants help employers benchmark pay, build salary ranges, and address pay equity, either on a specific project or as a partner across the full compensation cycle.
Source: Employer Associations of America, 2026 National Executive Compensation Survey.
Jackie Esposito is a Compensation Advisor at Catapult, where she helps employers build pay structures they can defend, from annual merit planning through executive packages. She works with member organizations on benchmarking, bonus plan design, and compensation strategy.
