Compensation Management Guide

Complete guide to understanding and using Compensation Management in Workbench. Learn how to plan merit increases, track compensation history, and manage recommendations through approval workflows.

Quick Summary

Compensation Management helps HR teams plan merit increases and bonuses, track compensation history over time, and manage recommendations through approval workflows. It's ideal for organizations that need to maintain accurate compensation records, enforce approval processes, and ensure budget compliance. Compensation Management provides a complete audit trail of all compensation changes and integrates seamlessly with review cycles and approval workflows.

What is Compensation Management?

Compensation Management is a comprehensive system for planning, tracking, and approving employee compensation changes. It maintains a complete history of each employee's compensation over time, including base salary, bonuses, stock, and other components.

During review cycles, managers and HR teams make compensation recommendations (e.g., merit increases, bonuses). These recommendations flow through approval workflows, ensuring proper authorization before changes are finalized. Once approved, recommendations become part of the employee's compensation history.

Compensation Management provides visibility into compensation trends, budget tracking, and a complete audit trail of all changes. It ensures that every compensation decision is properly documented and approved.

Key Terms

Compensation History: A record of an employee's compensation at a specific point in time. Each record includes an effective date, change type (e.g., hiring, promotion, annual, adjustment), and one or more compensation components (base salary, bonus, stock, etc.).
Compensation Component: A specific type of compensation within a compensation history record. Common components include base salary, hourly rate, bonus, stock/equity, commission, and other custom types. Each component has an amount and currency.
Compensation Recommendation: A proposed compensation change made during a review cycle. Recommendations include the proposed components (e.g., new base salary, bonus amount) and must go through approval workflows before becoming part of the employee's compensation history.
Change Type: A category that describes why a compensation change occurred. Common types include "hiring" (initial compensation), "promotion" (compensation change due to promotion), "annual" (annual review adjustment), "adjustment" (other changes), and "import" (data import).
Effective Date: The date when a compensation change becomes effective. This is used to track compensation over time and ensure accurate historical records.

When to Use Compensation Management

Ideal For:

Organizations that need to track compensation history over time
Companies with approval workflows for compensation changes
HR teams that need to plan merit increases and bonuses during review cycles
Organizations requiring budget compliance and spending tracking
Companies that need a complete audit trail of compensation decisions

Who Benefits:

HR Teams: Centralized compensation tracking, approval workflows, budget management
Managers: Easy recommendation process, approval visibility, budget awareness
Finance/Leadership: Budget compliance, spending oversight, audit trails
Employees: Transparent compensation process, historical tracking

How Compensation Management Works

1. Track Compensation History

Maintain a complete record of each employee's compensation over time, including all components and effective dates.

2. Make Recommendations

During review cycles, managers and HR teams make compensation recommendations (merit increases, bonuses, etc.).

3. Approval Workflow

Recommendations flow through approval workflows, ensuring proper authorization before changes are finalized.

4. Update History

Once approved, recommendations become part of the employee's compensation history with the appropriate effective date.

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Compensation management interface showing history tracking, recommendations, and approval workflow

Compensation Components

Compensation is made up of different components. Each compensation history record can include multiple components:

Common Components

Base Salary: Annual base salary amount
Hourly Rate: Hourly rate (alternative to base salary)
Bonus: Bonus amounts (one-time or recurring)
Stock/Equity: Stock options or equity grants
Commission: Commission-based compensation

Component Details

Each component has an amount and currency
Components can have optional notes for additional context
For base salary and hourly rate, you typically provide one or the other (not both)
Multiple components can exist in a single compensation record
Components are tracked with effective dates for historical accuracy

How Compensation Management Fits Into Your Review Process

Compensation Management works together with other Workbench features to create a complete review system:

Review Cycles: Compensation recommendations are made during review cycles as part of the evaluation process.
Approval Workflows: Recommendations flow through approval workflows to ensure proper authorization before changes are finalized.
Budget Tracking: Compensation recommendations are tracked against review cycle budgets to ensure compliance.
Performance Metrics: Compensation decisions are informed by performance evaluations completed during review cycles.

Common Use Cases

Annual Merit Increases

Plan and approve merit increases during annual review cycles, with recommendations flowing through approval workflows.

Process: Manager recommendation → HR review → Finance approval → History update

Performance Bonuses

Award performance-based bonuses tied to review cycle evaluations, with budget tracking and approval workflows.

Process: Performance evaluation → Bonus recommendation → Approval → Payment

Promotion Adjustments

Track compensation changes due to promotions, including base salary adjustments and equity grants.

Process: Promotion decision → Compensation adjustment → Approval → History update

Historical Tracking

Maintain a complete audit trail of all compensation changes over time, with effective dates and change types.

Use: Reporting, compliance, trend analysis, employee records

Frequently Asked Questions

Can I track compensation for employees who are paid hourly vs. salaried?

Yes, Compensation Management supports both salaried and hourly employees. For salaried employees, you track base salary. For hourly employees, you track hourly rate. You typically provide one or the other (not both) for each employee.

What happens if a compensation recommendation is rejected in the approval workflow?

If a recommendation is rejected, it does not become part of the employee's compensation history. The recommendation remains in the system for reference, but no compensation change is made. You can modify and resubmit recommendations if needed.

Can I import historical compensation data?

Yes, you can import compensation history during data import. When importing, you can specify compensation components, effective dates, and change types. This allows you to build a complete historical record even if you're just starting to use Workbench.

How does budget tracking work with compensation recommendations?

Compensation recommendations made during review cycles are tracked against the cycle's budget. As recommendations are approved, they count toward the cycle's total budget, increase budget, and bonus budget. This helps ensure you stay within budget limits throughout the review process.

Related Concepts

To get the most out of Compensation Management, you should understand these related concepts:

Review Cycles — Compensation recommendations are made during review cycles
Approval Workflows — Recommendations flow through approval workflows for authorization
Org & Team Management — Organizational structure determines approval chains

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