Compensation review

Your compensation plan is a living document. It’s important to conduct a regular compensation review to retain employees and stay competitive.

Why should you review your employees’ compensation?

It should be part of your people strategy to regularly evolve your compensation plan based on factors like the market value of specific roles and inflation.

What to consider as you review compensation

1. Audit your job levels, role descriptions, and compensation bands

Accurately assigning job levels to each employee helps set expectations about their role and opportunities for advancement. Does each description accurately describe each employee’s job responsibilities? Have this conversation with your employees, because these job levels will need to correspond to a compensation band. Getting these details right will save you time as your team continues to grow.

2. Research salary and equity against the market

Once you have your job levels in a good place, make sure that existing salary and equity ranges, or compensation bands, are still relevant for your employees’ location, industry, and role. You can do this by using Carta Total Comp, which uses data from our database of customers along with machine learning to establish salary and equity ranges.

Market value of industry and job function

The market for roles within an industry or job function can change even over a short time.

Cost of labor

Most companies adjust compensation based on a region’s cost of labor. A competitive compensation package will always use an employee’s location as a starting data point, since the cost of labor can vary widely between cities.

Inflation

In response, salary budgets are projected to increase just over 4% in 2023, a significant rise from the flat 3% increase we’ve seen for the past decade.

3. Reward your high-performing, high-value employees

Employees who feel like they’re not compensated fairly are more likely to quit.

4. Plan for employees with vested equity

Equity compensation often comes with a time-based vesting schedule.

When should you do a compensation review?

Many companies review compensation each year to coincide with their annual budget planning, but there are some other situations where you might need to review compensation:

• With annual performance review cycles, to closely link job levels and compensation
• When your industry is booming and you’re competing for the best talent
• To prepare for upcoming pay transparency legislation that will affect your company

How Carta Total Comp can help

Updating your compensation plan can help attract top talent and retain high performers—and it doesn’t have to take a lot of time. Carta Total Comp uses data from over 120,000 employees across Carta’s customer base to help automate your compensation planning.

Download Carta's equity refresh calculator

If you have employees who have equity grants that are almost fully vested, it may be time to issue equity refresh grants to help with retention.

Author: Josh Steinfeld
Josh Steinfeld leads product strategy for Carta Total Compensation.