Most compensation cycles do not fall apart in April. They fall apart in the last ten days before letters go out when current CTC sits in one spreadsheet, appraisal ratings in another, and nobody actually locked the increment budget back in October. Then a strong performer gets 7% while a peer gets 14%, and there is no written logic to point to.

This checklist fixes that: seven phases, in the order you run them, plus the India-specific compliance checks generic guides igno https://www.google.com/maps re.

What Compensation Planning Cover? 

Compensation planning is where you decide what people get paid, how it is structured, and what it costs the business in total. It includes five things: fixed pay, variable pay, benefits, equity, and statutory components like PF and gratuity. It is not payroll. Planning is the decision layer; payroll simply executes those decisions. If your planning is loose, payroll just runs that looseness faster.

The compensation planning checklist 

Phase 1: Gather your baseline data

Gather current CTC for every active employee, split into fixed, variable and benefits. Map each person to a grade or band. Reconcile against payroll’s last processed month. Then lock one file, with one owner parallel copies are the single biggest source of rework in the whole cycle.

Phase 2: Set the compensation budget

Calculate total payroll cost including employer PF, ESI and gratuity accrual, not just gross CTC. Agree the increment pool as a percentage of that cost with Finance, in writing. Budget promotions separately from merit, and get a dated sign-off.

Phase 3: Benchmark against the right market

Define your comparator set by industry, stage and city. Split benchmarks by location: Foreg. Bengaluru and Indore are not one market. Compare fixed pay against fixed pay, and record the source and date of every number.

Phase 4: Design or revalidate the salary structure

Keep basic plus DA near half of CTC to stay aligned with the Code on Wages. Recheck the PF and gratuity impact of any change to basic. Test the structure on a few sample employees before rolling it out.

Phase 5: Develop the increment and promotion matrix

Build a grid of performance ratings against position in the band. Assign ranges, not fixed numbers, so managers have some room. Set higher, separate percentages for promotions, then run the whole matrix against your Phase 2 budget.

Phase 6: Route approvals and communicate

Fix the approval chain before proposals open, with a hard close date. Run a fairness audit, get timestamped sign-offs at each level, and issue letters that show the full structure, not just the new CTC number.

Phase 7: Hand off to payroll and audit the cycle

Transfer approved structures with a clear effective date. Confirm PF, ESI and professional tax recalculate correctly. Archive the decision trail, record actual spend against budget, and note what broke for next year.

India-specific compliance checkpoints

This is where global compensation content stops being useful.

• Wage definition (Code on Wages): if excluded components cross half of total remuneration, the excess gets added back into “wages” for statutory calculations. In practice, this pushes basic plus DA toward 50% of CTC.
• PF: 12% employee and 12% employer on the applicable wage base. Any change to basic in Phase 4 moves this number.
• ESI: applies below the prescribed wage ceiling. Check which employees cross the threshold after increments, since some exit coverage mid-year.
• Gratuity: payable after five years of continuous service, calculated on basic plus DA. Raising basic raises your accrued liability, not just this year’s cash.
• Statutory bonus: eligibility runs to a monthly wage ceiling, with the calculation capped lower. Check whether your performance bonus discharges this obligation or sits on top of it.
• Professional tax and minimum wages: both are state subjects, so multi-state teams face multiple schedules, revised periodically by state and skill category.

Running the cycle in Fovero

Most of the pain here is data pain. In Fovero, the employee master holds current structure, grade and increment history as one record, so Phase 1 is an export rather than a reconstruction. Appraisal ratings feed straight into the increment matrix, so Phase 5 runs on real data. Approval workflows carry the timestamped trail Phase 6 needs, and approved structures push into payroll with the effective date attached so statutory recalculation happens automatically. Same seven phases, far less spreadsheet archaeology.

Download the checklist 

The full checklist comes as an editable file you can share with your team. It covers all seven phases, the India-specific compliance checkpoints, and a blank increment matrix you can fill in with your own salary bands. Just enter your work email and company size, and it’s ready to use in your next cycle.