Ground your merit cycles with market data, salary ranges and SAAS decision tools to build trust with your employees.
Ground your merit cycles with market data, salary ranges and SAAS decision tools to build trust with your employees.
In an era of heightened pay transparency, evolving employee expectations, higher employee attrition rates, and expanding pay equity legislation, companies can no longer afford to approach merit cycles with guesswork, gut instinct and manual spreadsheet-driven processes. Forward-looking organizations are grounding their merit cycle processes in reliable salary market data, structured pay ranges and more automated workflows, resulting in more equitable, consistent, and strategically aligned merit pay decisions.
Done well, a data-driven, automated merit cycle not only ensures fairness—it also boosts employee trust, retention, and performance. Here’s how companies are making it work, and how platforms like OpenComp help lead the way.
The conventional annual merit cycle—often spreadsheet-based, rushed, and disconnected from market reality—is rapidly becoming a relic of the past. Without structured pay ranges, reliable benchmarks and software-driven processes, compensation decisions often depend on manager discretion or outdated salary data. The ability to make changes during the process is also highly limited and may itself prevent better outcomes This leads to:
<Most important, all of the above factors lead to higher employee dissatisfaction and heightened attrition risk. As companies strive to remain competitive and compliant, aligning compensation decisions with the external market and internal guidelines is no longer optional.
Market data provides the foundation for understanding what a specific role is worth in today’s labor market. Rather than relying on anecdotal inputs or generic surveys, modern compensation leaders use real-time, role-specific benchmarks to:
Using tools like OpenComp, organizations gain access to verified, dynamic compensation benchmarks by industry, location, company size, and funding stage—allowing them to make smarter decisions during merit cycles.
“Grounding your merit cycle in market data ensures you're rewarding people in line with both their contribution and the competitive landscape,” says Jason White, OpenComp's Principal Compensation Consultant. “It helps prevent overpaying top-of-range employees while ensuring others aren’t lagging behind.”
Pay ranges—structured salary bands that align job roles with minimum, midpoint, and maximum pay levels—are crucial for consistency. When used during merit cycles, they enable companies to:
Pay ranges help normalize performance-related increases by role and level, reducing subjective decision-making and increasing employee confidence in the process.
Individually, market data and pay ranges are useful. Together, they’re powerful.
Market data provides the external reference point; pay ranges translate that data into an internal compensation framework. During merit cycles, using both ensures that increases:
For example, if a Senior Engineer is near the top of her pay range and their market benchmark hasn't moved, a small or no increase might be appropriate—even with strong performance. Conversely, an underpaid employee who’s below market may need a market adjustment plus a merit increase to retain them and ensure fairness.
OpenComp’s merit cycle module is built with this market data and pay range integration in mind. It gives compensation and People Ops leaders a centralized place to:
The result is a streamlined, collaborative, and data-driven process that brings together People, Finance, and Leadership around a single source of truth.
“Spreadsheets are a sure-fire way to make a mess of your merit cycle,” says Noah Bennett, OpenComp's lead Product Manager on its Merit Cycle module. “With OpenComp, Comp & People Ops leaders can layer in performance based recommendations against the backdrop of market data and pay ranges. Data and ranges are integrated into a system that enables employers to handle exceptions and overrides seamlessly, while running Cycles that draw from different budget pools, among other things.”
In today’s environment, employees are asking more questions:
“Why did I get this raise?”
“How do I compare to my peers?”
“What’s the path to the next level?”
A merit cycle process rooted in data,ranges and software enabled automation makes these conversations easier because the rationale and data underlying decisions is transparent to employees. Now, whens People Ops teams publish clear compensation philosophies and growth frameworks – so employees know what to expect and how to grow – People Ops teams can ensure that their compensation decisions and communications follow those philosophies and frameworks
This transparency builds trust, reduces attrition, and helps reinforce a culture of objectivity and fairness.
For companies scaling quickly, merit cycles can feel like a burdensome administrative task. But with the right tools and approach, they become a strategic lever—one that aligns compensation with market forces, organizational goals, and employee expectations.
Running an effective merit cycle isn’t just about adjusting salaries and equity. It’s about balancing performance, objectivity, and competitiveness in a way that builds a better company. Grounding your process in market data and structured pay ranges integrated into automated decision tools is the best place to start.
Companies using OpenComp reduce merit cycle complexity, drive internal alignment, and improve employee trust—all while ensuring every dollar spent on compensation supports retention and performance. This helps these companies outperform their peers who are using outdated methods in the important areas of employee retention, engagement and productivity.If you’re still running merit cycles on spreadsheets or gut feel, it’s time for a smarter, more modern approach.
