Compensation Planning
Annual planning cycles, pay structure design, merit matrices, budget modeling, and FLSA compliance for your workforce.
Plan Smarter. Pay Better.
Compensation planning is more than setting salaries. It is about building a framework that attracts the right people, rewards performance, stays within budget, and keeps you compliant.
Catapult helps you design pay structures, merit increase matrices, and annual planning cycles that align compensation with business performance.
What We Cover
The annual compensation planning cycle
Most employers run the same cycle every year. It works best when each step is finished before the next one starts.
Review the market
Update salary survey data and decide whether your pay ranges need to move.
Set the budget
Agree the total spend for merit increases, promotions and any market adjustments, and model what it costs across the workforce.
Build the merit matrix
Set increase guidelines that combine performance with where each person sits in their range, so a strong performer low in the range gets more room than one already near the maximum.
Prepare managers
Give managers their budgets, guidelines and the reasoning behind them, so they can make and explain decisions consistently.
Review for equity
Before anything is final, check the proposed increases for unexplained differences between similar employees.
Communicate
Tell employees about their pay decision clearly. A total rewards statement can show the full picture beyond base pay.
Compliance checks that belong in every cycle
- FLSA classification. Pay and job changes can affect whether a role still meets the salary and duties tests for exempt status.
- Equal pay. The federal Equal Pay Act and many state laws require equal pay for substantially similar work, with only limited reasons for differences.
- Pay transparency. States that require pay ranges in job postings expect posted ranges to match how you actually pay.
- Minimum wage changes. State and local minimum wages often rise on January 1 and can push up pay for entry-level roles and the ranges above them.
Compensation planning questions
When should we start planning?
Most annual cycles start a few months before increases take effect, which leaves time to approve budgets, train managers and review results.
What is a merit matrix?
A grid that suggests an increase range based on two things: the employee’s performance rating and where their pay sits in its range. It keeps decisions consistent across managers.
Should merit and market adjustments be separate?
Many employers keep them separate. Merit rewards performance, while a market adjustment fixes pay that has fallen behind the market. Keeping them apart makes both easier to explain.
How large should the merit budget be?
It depends on how fast pay is moving in your market, where your pay sits today and what the business can afford. Salary increase budget surveys published each year give a useful reference point, and your own turnover and offer data show whether you are keeping up.