How to Run a Merit Increase Cycle
A merit cycle is a governed workflow, not a shared spreadsheet. Here’s how to run one from budget to payroll with an audit trail at each step.
Start with a budget
HR opens the cycle with a name and a budget; it starts in planning. The budget frames every proposal, so managers plan against a known envelope rather than in the dark.
Before you open the cycle
- Set the total merit budget
- Confirm bands and benchmarks are current for context
- Confirm performance ratings are in for pay-for-performance
- Decide the manager proposal window
The approval flow
| Stage | Role | Action |
|---|---|---|
| Propose | Manager | New salary + bonus with justification |
| Adjust | HR | Set approved salary/bonus; mark adjusted |
| Submit | HR | Send the cycle for approval |
| Finalize | Executive | Close the cycle; export to payroll |
Keep comp data protected
Finalize to payroll
Finalizing closes the cycle, exports the approved changes to payroll, and writes an audit event with the export result - so an approved raise becomes an actual paycheck and the decision is on the record.
Frequently asked questions
Who does what in a merit cycle?
HR starts it with a budget, managers propose salary/bonus with justification, HR adjusts to approved figures, HR submits, and executives finalize - which exports to payroll.
Is the cycle tied to a budget?
Yes. Each cycle carries a budget so proposals and adjustments are made against a known envelope.
Who can see everyone’s comp?
Only owner, admin, and HR can read the full cycle; proposals expose sensitive salary data, so managers and plain employees can’t enumerate the whole org.
What happens when a raise is approved?
Finalizing closes the cycle, exports approved changes to payroll, and records an audit event - turning the raise into a paycheck.
Stay in the loop
One practical finance briefing a week - new guides, checklists, and benchmarks.
Merit cycles that stay governed
Run from budget to payroll with an audit trail at each step.
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