Are your pay practices keeping you competitive – or quietly putting your organization at risk? Annual salary budgets and structure updates are essential, but they only tell part of the story. To build true pay equity and protect retention, HR leaders must also assess pay health. Each year, CBIZ issues our Salary Planning Letter – providing the data and recommendations leaders need to act confidently.
Use Structure Updates and Budgets to Stay Competitive
Salary structure updates modify the minimums, midpoints, and maximums of pay ranges to reflect changes in the external market. This ensures new hire pay remains competitive and prevents range erosion.
Annual pay increase budgets allocate funds to move employees through the pay range – rewarding growth, preventing compression, and retaining top talent. Together, these practices serve as powerful tools for maintaining competitive pay during years when a full benchmarking study isn’t conducted.
Uncover Pay Health: The Overlooked Factor in Equity and Retention
Compensation assessments confirm whether your pay ranges align with the market, but they don’t always reveal where employees fall within those ranges. That insight, pay health, is critical.
- Low-range clustering: When employees are grouped below the midpoint, even with structural increases, catching up may take years at standard budgets.
- High-range saturation: A well-paid workforce can indicate competitiveness, but it also raises concerns about compression, motivation, and financial sustainability.
Understanding pay health ensures that recommended budget increases preserve, adjust, or prevent worsening disparities.
Tailor Your Budget to Match Workforce Reality
Here’s how to interpret and act on the recommendations in your planning letter:
- Healthy pay spread (employees well-distributed around midpoints): Follow the recommendation as written for balanced progression.
- Skewed low (many employees below the midpoint): Increase the allocation to the pay raise pool to speed up pay alignment.
- Clustering near or above midpoint: Reduce above-market increases and prioritize strategic, performance-based adjustments.
Other signals, such as turnover trends, exit interview feedback, and offer acceptance rates, can also guide budget adjustments.
Boost Impact: Budget from Midpoints, Not Salaries
Instead of basing your increase pool on current salaries, calculate it as a percentage of the sum of employee midpoints. When employees are positioned lower in the range, budgeting from midpoints increases the dollar pool – helping them advance more significantly. If employees are positioned higher, the budget naturally decreases — encouraging careful, performance-driven allocations. This approach aligns spending with job value, adding smart nuance without adding complexity.
The Pay Planning Advantage
Salary planning is most effective when it integrates philosophy, market data, and employee progression. By combining structure updates, budget strategies, and health insights, HR leaders can go beyond compliance and achieve a real competitive advantage. CBIZ partners with organizations to transform annual planning into disciplined, long-term compensation strategies that promote retention, equity, and success. Contact a member of our team to learn how we can assist with your salary planning.
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