In brief: Year-end is one of the best times for employers to revisit compensation, because bonuses, budgets, open enrollment, and merit increases are all being decided at once. Before choosing a project, employers should agree on the outcome they want. Common options include market pricing, salary ranges, a bonus or incentive plan review, and a Total Rewards Statement (TRS), according to compensation advisors at The Workplace Advisors.
Key takeaways
- Year-end is when employers and employees both think hardest about pay, which makes it a natural time to review compensation.
- Treat any compensation review as an organizational project with clear goals, and involve all key stakeholders from the start, whether you have 5 employees or 500.
- Agree on the problem before picking a solution. When employees leave for higher pay, the cause may be below-market pay, or they may not see the full value of their total compensation.
- Four common options for 2027: market pricing, salary ranges, a bonus or incentive plan review, and a Total Rewards Statement.
- A Total Rewards Statement works best as education, not as a substitute for raises or bonuses.
As we wind down 2026, many workplaces are doing the same things. Year-end bonuses are decided, budgets are set for next year, open enrollment wraps up, and merit increases are discussed. For many employers, this is the time they think hardest about pay. It’s also the time when employees think most about it.
The core question: what do you want your employees to understand about their pay, benefits, and rewards moving into the new year? There is more than one way to answer this question, and the right answer depends on what you’re trying to solve.
Where should employers start when reviewing compensation?
Start with outcomes, not tools. Pay and rewards affect every employee and the bottom line, whether you have 5 employees or 500. Susan Palé, Vice President of Compensation at The Workplace Advisors, recommends treating any compensation review as an organizational project with clear goals, rather than a one-off task.
That means identifying and involving all key stakeholders from the start. This might include whoever makes budget decisions; managers, supervisors, and others who communicate with employees and answer their questions; and the person or people responsible for payroll and benefits information. At a small company, that may simply be the owner and the office manager. The scale looks different for every organization, but the principle is the same: know who’s involved and what success looks like before you begin.
Why does alignment matter in a compensation review?
Agree on the problem before picking a solution. If employees are leaving for higher pay, the cause may not be what it seems. They may not realize the full value of their total compensation and are leaving for a bigger base salary. Or your pay for certain roles may have fallen below market. A Total Rewards Statement addresses the first problem, a market pricing review addresses the second, and many employers need both.
Alignment also means consistency. Everyone who talks to employees about pay should give the same message, and that message has to match reality. Telling employees “we pay competitively” only works if the data backs it up. Pick one or two goals, such as keeping good people, hiring more competitively, or helping employees see the value of what they already receive, and check each decision against those goals. Once you know what you’re solving for, the right tool becomes much clearer.
What compensation projects should employers consider for 2027?
There’s no single right answer. Each option below can be scaled to fit your organization’s size and budget, and many employers combine more than one.
Market pricing (salary benchmarking)
What it is: Comparing what you pay for each role to what similar employers in your industry and area pay.
Consider it if: Turnover is rising, roles are taking longer to fill, candidates are turning down offers, or pay hasn’t been reviewed in two or more years.
Why it matters: Pay that falls behind the market usually shows up first as turnover and hiring delays. A market review gives you a clear, data-backed picture of where you stand, so decisions about raises and offers aren’t based on guesswork. It’s especially valuable before next year’s raise budget is set.
Salary ranges (pay structure)
What it is: A minimum, midpoint, and maximum for each role or group of similar roles.
Consider it if: Starting pay depends on who’s doing the hiring, newer employees earn close to or more than experienced ones, or you have no defined ranges.
Why it matters: Ranges bring consistency and fairness to pay decisions and give employees a clearer picture of how they can grow. They also make it easier to keep up with the growing number of states and cities that require pay ranges in job postings.
Bonus or incentive plan review
What it is: Checking whether your bonus or incentive plan is doing what it was designed to do.
Consider it if: You’re not sure this year’s bonuses rewarded the right results, employees don’t understand how bonuses are earned, or the bonus has become something employees simply expect.
Why it matters: A bonus only motivates when employees see a clear link between their work and the payout. Year-end, while the results are fresh, is the best time to check whether that link is there and whether the plan still supports where the business is headed.
Total Rewards Statement (TRS)
What it is: A personalized statement showing each employee’s full compensation in one place: base pay, bonus, employer-paid benefits, retirement contributions, PTO, and other perks.
Consider it if: Employees don’t know how much you contribute to their benefits, they compare job offers on base pay alone, or you offer perks that rarely get mentioned.
Why it matters: Most employees focus on their paycheck and overlook everything else the organization provides. A TRS puts the full investment in front of them, including the perks unique to your workplace, such as tuition help, flexible schedules, or wellness stipends.
What makes a Total Rewards Statement effective?
How a TRS is communicated matters just as much as what’s on it.
- Introduce it with context. Help employees understand what it is and why they’re receiving it.
- Frame it as education. A TRS is not a substitute for raises or bonuses. If it arrives in place of a bonus check, it can backfire.
- Time it thoughtfully. Make sure the people answering employee questions are prepared.
- Invite feedback. Give employees a way to share what they value most, which can help guide future benefits decisions.
Looking ahead to 2027
Year-end is a natural time to step back and look at how you reward employees. You might check your pay against the market, set clearer ranges, rethink your bonus plan, or help employees see the full value of what they receive. Either way, the approach is the same: start with the outcome you want, choose the option that fits, and communicate it clearly.
These options also work well together. A market review can lead to new salary ranges, and a TRS can help employees understand the full picture once those decisions are made.
If you’d like to talk through which approach makes sense for your organization, Susan and our compensation team are happy to help.
Frequently asked questions
What is a Total Rewards Statement?
A Total Rewards Statement is a personalized document that shows the full value of an employee’s compensation, including base pay, bonuses, employer-paid benefits, retirement contributions, paid time off, and other perks, in one place.
Can a Total Rewards Statement replace a raise or bonus?
No. A TRS is an educational tool that shows employees what they already receive. If it is presented in place of a raise or bonus, employees are likely to see it as a substitute, and it can damage trust.
What should employers do if employees are leaving for higher pay?
Start by finding the cause. If pay for certain roles has fallen below market, a market pricing review is the place to start. If pay is competitive but employees don’t see the full value of their benefits and other rewards, a Total Rewards Statement can help. Many employers find that both are needed.
How often should employers review pay against the market?
Many employers review market pay every year or two. A review is worth doing sooner if turnover is rising, roles are hard to fill, or candidates are turning down offers.
Do small employers need salary ranges?
Ranges are useful at any size. Even a small employer benefits from consistent starting pay and clear growth paths, and pay transparency laws in some states and cities apply to smaller employers as well.
Should market pricing come before salary ranges?
Usually, yes. Salary ranges are typically built on market data, so a market pricing review often comes first and provides the foundation for the ranges.
About the author: Nicholas Ritchie, PHR, is an HR & Recruiting Consultant at The Workplace Advisors, where he advises employers on recruiting and HR compliance.
About The Workplace Advisors: The Workplace Advisors is an HR consulting firm that provides outsourced HR support, compliance guidance, policy development, and training to small and midsize employers and to members of partner trade associations.
This article was originally published by The Workplace Advisors at https://theworkplaceadvisors.com/.
