Create a Compensation Cycle: Budget

The Budget page of a compensation cycle setup allows admins to set an overall budget for the cycle and provide raise guidance for employees who are eligible for merit or promotion increases. At the end of this step, you will see the projected spend for this compensation cycle based on the raise guidance calculated for eligible employees. 

Note: The budget set on this page is separate from the budget for bonus. Budgets for bonus plan payout and one-time bonuses are managed in a later step. See Create a Compensation Cycle: Bonus for more details. 

Budget

Complete the following steps to set a budget for merit and/or promotion raises and provide raise guidance for eligible employees. The raise guidance will be shown to managers during the active cycle to support them in making compensation cycles.

Step 1: Set the raise budget

There are two ways to enter an overall budget for merit raise increases and promotions. This will become your “top-down” budget to track total spend against.

• Increase/employee: Input the average percent (%) increase for each employee. This is calculated based on the total current pay (base pay + variable pay if applicable) for all eligible employees in the cycle.
• Raise budget: Input the total budget as a lump sum amount. The average percent increase per eligible employee will automatically be calculated for you. 

Step 2: Promotion raise guidance

Provide recommenders with a raise guidance for promoted employees. This section will only appear if promotions are added to the Participants page. To add promotions to the cycle, return to the Participants page and follow the steps outlined in Create a Compensation Cycle: Participants.

• If all promoted employees are assigned to a compensation band at promotion, you can provide promotion raise guidance based on target band attainment % or % increase to total pay.
  • Target band attainment: Calculates promotion raise guidance based on placement in the employee’s new compensation band. For example, if this is set to 50%, the employee will be placed at the halfway point of their new compensation band.
  • Increase %: Calculates promotion raise guidance based on a percent increase to the employee’s current total on-target earnings (base pay + variable pay if applicable). For example, if an employee’s total on-target earnings is $80,000, a 10% increase would equal a $8,000 raise.
• If any promoted employees are not assigned to a compensation band at promotion, you can still provide promotion raise guidance based on Increase %.

Step 3: Merit raise guidance

Provide recommenders with raise guidance for eligible employees who are not receiving promotions.

• If a performance review rating question was linked to this compensation cycle on the Rules and Ratings page, you can provide increase % guidance based on each rating.
• If no performance review rating question was linked to this compensation cycle, you can provide a flat increase % guidance for all employees.

Step 4: Prorate guidance based on employee tenure or last compensation change date

Follow these optional steps to prorate raise guidance based on an employee’s company tenure or last compensation change date. Otherwise, click Skip to confirm your budget and move on to the next step of cycle setup. 

For prorate guidance based on…, decide if you want to prorate raise guidance based on employee tenure or their last compensation change date.

• Select Employee start date to calculate based on employee tenure.
  • Employee start date is based on the Start date in the Employee profile.
• Select Last compensation change date to calculate based on the last time the employee received a pay change.
  • Last compensation change date is based on the pay effective date in the Employee pay table. 

Under Calculate proration, decide if you want to calculate prorated guidance by number of days, months, or quarters. 

• Daily: Raise guidance will be prorated based on the number of days that have elapsed since the employee’s start date or last compensation change date. 
  • Prorated % = (Number of days between the employee’s start date or last compensation change date and the end of the proration date range) / (Total number of days in the proration date range)
• Monthly (calendar): Raise guidance will be prorated based on the number of months that have elapsed since the employee’s start date or last compensation change date. This calculation will be based on the calendar month of the date. This means that an employee who joined on May 1st would be in the same cohort as employees who joined on May 15th or 31st. 
  • Prorated % = (Number of months between the employee’s start date or last compensation change date and the end of the proration date range) / (Total number of months in the proration date range)
• Quarterly (calendar): Raise guidance will be prorated based on the number of calendar quarters that have elapsed since the employee’s start date or last compensation change date. This calculation will be based on the calendar quarter of the date. This means that an employee who joined on April 1st would be in the same cohort as an employee who joined on June 30th. Calendar quarters are January - March (Q1), April - June (Q2), July - September (Q3), and October - December (Q4). 
  • Prorated % = (Number of quarters between the employee’s start date or last compensation change date and the end of the proration date range) / (Total number of quarters in the proration date range)
• Quarterly (fiscal): Raise guidance will be prorated based on fiscal quarters. Fiscal quarters are dependent on the company fiscal quarter setting and will only be available if fiscal quarter start month is set.

Select the range of employee start dates that should have prorated raise guidance. You can select a time range of up to 1 year (365 days). 

The Budget impact section will calculate the amount that your overall raise guidance budget will be reduced by as a result of the proration. You can click on the number of employees for detailed information about each employee’s prorated raise guidance. 

Multiple currencies

If the cycle includes an employee population that is compensated in different currencies, there will be a banner listing all of the currencies included in the cycle along with the conversion rates that were set on the Currency page. 

All budgeting for the cycle is done in the company currency, which is defaulted to the currency with the greatest number of employees. To edit the company currency, visit the Currency page in cycle setup.  

Projected distribution chart

The projected distribution chart shows the budget breakdown by the three existing categories: promotion guidance, raise guidance, and remaining budget.

If promotion and merit raise guidance exceed the total budget, you will receive an exceeding budget error and be requested to adjust the budget or raise guidance before proceeding to the next step of cycle setup.

Bulk update raise guidance

Instead of using the built-in promotion raise guidance, merit raise guidance, and prorate merit guidance calculators, admins can bulk update custom raise guidance by uploading a CSV. 

To upload a CSV:

1. Select Upload guidance.
2. Download the Raise Guidance CSV template.
3. Update the Raise Guidance column with your own values.
   • Raise guidance should be expressed as a monetary value rather than a percentage. For example, if an employee earning $100,000 will receive a 5% raise, enter 5000 into the Raise Guidance column.
4. Upload the updated CSV.
5. Select Save.