Create a compensation cycle

What this achieves

A compensation cycle is one round of pay increases, covering a defined group of employees over a defined window. Creating it sets the rules the round will run under; it starts in draft and reaches nobody until you launch it.

Required role: Administrator.

Before you start

An active merit matrix must exist, because a cycle cannot run without one. If you want ratings to feed the recommendations, the performance cycle they come from should be complete before you start.

Steps

Go to Compensation → Cycles.
Select Create Cycle.
Under 1. Basics, enter the Name and an optional Description.

Example: 2026 Annual Merit Review.
Set the Effective Date.
Set the Planning Start and Planning End.
Under 2. Configuration, choose the Merit Matrix.
Choose the Performance Cycle, or leave it as No performance cycle.
Under 3. Budget, enter the Total Budget Amount and choose the Currency.
Choose the Budget Enforcement.
Under 4. Scope, choose which employees the cycle covers.
Select Create Cycle.

The two dates mean different things

Option	Description
Effective Date	When approved changes take effect. This is the date written onto the employee record, and the date payroll reads the new salary from.
Planning Start and Planning End	The window in which managers make proposals. It governs the process, not anyone’s pay.

Example: HC Corp UK Ltd plans through February and March for increases effective 1 April 2026. The planning window is when the work happens; 1 April is when anyone is actually paid differently.

Budget enforcement

Option	Description
Strict budget	Over-budget proposals cannot be approved.
Flexible budget	An over-budget proposal can be approved, and doing so records an override against a reason you must give.

Flexible is usually the more honest setting. Budgets get exceeded for real reasons, such as a retention risk, and a recorded reason is more useful than a hard block that moves the decision into email where nobody can audit it.

Scope

Option	Description
Company-wide	Everyone is included.
Specific Departments	Only the departments you choose.
Custom Employees	Only the employees you name.

Example: running the 2026 cycle for HC Corp UK Ltd’s Engineering and Sales departments covers 34 and 21 people respectively, and leaves the other departments untouched.

Linking a performance cycle

Linking a completed performance cycle feeds each employee’s rating into the merit matrix, so their recommendation reflects how they were rated rather than only where they sit in their band. It is optional; without it, recommendations are driven by position in range alone.

A rating produces a recommendation. It does not produce a decision — the manager still proposes, and an administrator still approves.

What happens next

The cycle sits in Draft. Nothing has been created for any employee and no manager can see it. Launching the cycle is the step that creates the budgets and the individual plans, and it is covered on its own page because it is the point at which the cycle becomes visible to managers.