The article explains how to manage Pay Grades, Merit Matrix, Compensation Cycles, and Pay Changes in an HR system. It covers adding and assigning pay grades to jobs or employees, handling pay outside assigned grades, and auditing changes. It details configuring merit matrices for performance-based raises, setting up compensation cycles with budgets and workflows, and the process for proposing, approving, and finalizing pay changes. Security settings control report access.
3. Employees Paid Outside of Their Assigned Pay Grade
2. Approving and Finalizing Pay Changes
Pay Grades
Pay Grades allow minimum and maximum pay rates with levels in between. These can then be assigned to employees or to jobs. When the pay grade has been assigned to either employees or to jobs, they will appear in the Employees On Pay Grade or the Jobs With Pay Grade widgets in the pay grade definition. Pay grades are also used in HR Action Requests (such as a Promotion action).
1. Adding a New Pay Grade
- Navigate to the Main Menu> Settings >HR Setup > Pay Grades
- Select "Add New"
- a. Code: Enter a code for the pay grade
- b. Pay Grade: Enter a name for the pay grade
- c. Description: Enter an optional description of the pay grade
- d. Active: Check this box to make the pay grade available to assign
- e. Effective Pay Grades: Enter the pay type, minimum, and maximum rates for this pay grade
- f. Steps: If there are predetermined steps for this pay grade, the steps can be defined here
-
Hit "Save"
2. Assigning Pay Grades
- Pay grades can be assigned to jobs under Main Menu > Settings > HR Setup > Jobs, if applicable, or they can be assigned to individual employees under Team > My Team > Employee Information, in the Pay Information widget on the employee’s profile.
Assigning Pay Grades to Jobs
- Settings > HR Setup > Pay Grades
- Select "Add New"
- Complete the applicable fields.
- Code: Enter a code for the pay grade.
- Pay Grade: Enter a name for the pay grade.
- Description: Enter an optional description of the pay grade.
- Active: Check this box to make the pay grade available to assign.
- Automatic: Checking this option will prevent manual intervention when moving employees from one pay grade to another. When the box is checked, the system will issue a warning. If you proceed, the system will gray out/disable the option, which cannot be undone. If you proceed, the system opens an Automatic Pay Grade Steps section in the Steps widget where configuration schedules can be set and applied to the pay grade. Employees assigned to the pay grade will automatically be advanced through the steps set in the Steps widget.
- Effective Pay Grades: Enter the pay type, minimum, and maximum rates for this pay grade.
- Steps: If there are predetermined steps for this pay grade, the steps can be defined here.
- Save
Assigning Pay Grades to Employees
- Go to Team > My Team > Employee Information.
- Go to the Pay Information widget.
- Select the applicable Pay Grade.
- Save.
- Once saved, the information from the Pay Grade will fill in the various fields.
3. Employees Paid Outside of Their Assigned Pay Grade
If an employee’s compensation is outside of their assigned pay grade, the system can display a warning or an error message.
- By default, pay grade violations are treated as Warnings. This setup will display a message when attempting to save the change.
- Error: will not allow the change to be applied.
- Ignore: Rates outside of the Pay Grade can be saved without error message.
- By default, pay grade violations are treated as Warnings, but this can be edited under Main Menu > Settings > Global Setup > Company Setup > HR Tab
4. Pay Grade Audit Report
A Pay Grade Audit report is available to review changes made to employee Pay Grades. All steps are available in the report. For Automatic Steps, a Y or N will display in the column to indicate if the pay grade is or is not automatic.
- Navigate to My Info > My Reports > System Reports > Audit Trail > Pay Grade Audit
- Select date(s) to run the report for.
- If an employee’s compensation is outside of their assigned pay grade, the system can display a warning or error message. A warning will display a message when attempting to save the change. An error will not allow the change to be applied.
Merit Matrix
1. Merit Matrix Configuration
- Navigate to Main Menu > Settings > HR Setup > Compensation Management > Merit Matrix
- Select "Add New"
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Select Matrix Type: Range of Values or Single Value Matrix
Please note: There are two types of merit matrices: the standard merit matrix and the single value merit matrix. The standard merit matrix allows for a range of values associated with performance ratings, while the single value merit matrix permits a single value for each rating without the need to enter a range.
- Select "Add New"
- Select the number of segments that each performance review rating should be broken into
- Ex: 1 segment would mean there will be a <Min, Min-Max, >Max segment
- Ex: 2 segments would have a <Min, Min-50%, 50.01%-Max, >Max segment
- Enter a name for the merit matrix and select Add Ratings
- Select the ratings that should be included in the merit matrix by clicking the checkboxes to the left of each rating and clicking "Select."
- Enter % increase amounts for each rating segment
- Ex from below: employee receives a |rating of 5 on their performance review, and is currently in the Minimum-25% range for their compensation, then they should receive a 4.5-5.00% increase.
- If pay range is min $25k, max $100k then the <min would be ~$24,999 and less and the > max would be ~$100,001 and greater
- Click "Save"
- Click "Save"
Compensation Cycles
1. Adding Compensation Cycles
- Go to the Main Menu > Settings > HR Setup > Compensation Management > Compensation Setup
- Select "Add New"
to configure the compensation cycle settings.
- a. Name: Enter a name for the compensation cycle (Ex. 2025 Annual Review)
- b. Description: Enter an optional description of the cycle
- c. Company EIN: Displays the selected EIN, if it is a multi-EIN company
- d. Status: By default, this will show as “Budget” until the cycle’s open date.
- e. Active: Check this box to allow the cycle to be used
- f. Type: Select the type of compensation that will be updated using this compensation cycle. Currently, there is only one option, “Base.”
- g. Cycle Manager: Select a manager who is responsible for this cycle. The selected Cycle
Manager is able to take part in any of the workflow steps associated with the compensation cycle. - h. Pay Change Reason: Select a pay change reason for changes relating to this compensation cycle.
- i. Workflow: Select the workflow for this cycle.
- j. Can Exceed Budget: Check this box to allow the cycle to exceed the defined budgets.
- k. Pay Change Types: Define the pay change types that will be allowed in this cycle (Ex. Merit, Promotion, Job Change)
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Configure the compensation cycle dates
- a. Cycle Dates Type:
- Common Date = all employees receive adjustments at the same time
- Anniversary Date / Anniversary Month = based on hire date or most recent job start date
- New Hire / New Job = based on hire date or most recent job start date, but only happens once.
- b. Open Date: The date when the cycle should begin (when managers should be able to enter proposed pay changes for their employees). This date cannot be changed after it is saved.
- c: Close Date: The date when the cycle should end (changes will no longer be allowed)
- d. Freeze as of Date: Marks the point at which the cycle becomes locked, preventing automatic additions of employees based on any filters. After this date, if any employee status changes occur, those employees will not be automatically included in the current compensation cycle, although they can still be added manually if necessary.
- e. Reference Date Type: Select the date that pay changes should be based upon. (Ex. Hire Date)
- f. Pay Change Effective Date Type: Select the date that pay changes should be applied.
- Day in Following Month After Reference Date: Allows you to select a specific day of the month following the reference date (Ex. 1st of the month following the Hire Date)
- End of the Month After Reference Date
- On Reference Date:
- a. Cycle Dates Type:
- Configure the compensation cycle criteria
- Filter for the employees who should be included in the cycle. If no filters are selected, all employees will be included.
- Filter for the employees who should be included in the cycle. If no filters are selected, all employees will be included.
- Configure the performance reviews settings, if performance review results will affect the compensation amounts.
- Select a merit matrix for this compensation cycle.
Please note: If you add a Performance Review Profile, the Merit Matrix will be a required field, and you won’t be able to save without one being assigned. If you do not have a Merit Matrix built, remove the Performance Review Profile, and then you can save. Then click the Merit Matrix link to create a new matrix.
- Review Ratings are required in order for a Merit Matrix to be completed
- Add the Performance Review Profile(s) to include in this cycle
- Select "Save"
- Select "Employees Preview:
- Confirm that the correct employees have been brought into the compensation cycle, based on the filters applied in the Compensation Cycle Criteria widget.
- Go back to the compensation cycle. Employees can be manually added/removed by selecting
"Add/Remove Employee to Cycle" - Add budget information
- Select the ellipses and then "View Compensation Budget"
Select "Update Budget" to bring in the eligible wages for all employees included in the cycle.
- Enter an overall budget % or $ Amount for each Pay Change Type entered in the compensation cycle widget. Entering a percentage will automatically fill in the dollar amount, and vice versa.
- Select "Save"
- Select "Fill Budget"
- This will calculate the budget amount each manager is allotted for their employees, based on the percentage above.
- Individual managers’ budgets can be adjusted by selecting the manager from the list on the left.
Please Note: selecting “Update Budget” after making a manual adjustment will reset all of the individual manager budgets to the default amount or percent. Individual manager adjustments should be made after all adjustments to the overall budget amounts are complete.
Pay Changes
1. Proposing Pay Changes
Once the compensation cycle is open, Managers can enter proposed pay change amounts for their employees.
- Go to the Main Menu> Team > Compensation > Worksheet
- Select the compensation cycle to edit
- The manager’s overall budget for increases will be displayed at the top of the worksheet, and the list of employees assigned to the compensation cycle will be displayed at the bottom.
- Information about the employee’s current pay, pay grades, and performance review scores can be used to determine the increase amounts. Select the "paper and magnifying glass"
icon to view the performance review for that employee.
- Enter the proposed increase for each employee and select Save.
- Notes can be entered by selecting the "page plus"
icon next to the employee’s name.
- Proposed pay changes can be submitted for approval individually, or all at once. Select the checkboxes for the pay changes you want to submit, and select "Send To Approve".
2. Approving and Finalizing Pay Changes
- Compensation Proposal requests will be listed in the approver’s To Do items.
- Select "View Compensation Proposal" to view a comparison between the employee’s prior pay rate and proposed pay rate.
- Select " Compensation Worksheet" to view the complete proposal worksheet for that employee’s manager
- Select the note icon
, if applicable, to view any notes provided by the manager
- Select " View Performance Review" , if applicable, to view the employee’s performance review
- Once approved, Compensation Proposal requests will be listed in the finalizer’s To-Do items.
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The finalizer will have the ability to override the final amount and effective date upon selecting “Finalize,” and the compensation amount will update automatically in the employee’s profile.
FAQ
Q: Why is the Pay Grade Audit Report unavailable?
A: To have access to the report, users must have the Pay Grade Audit setting enabled in their security profiles.
Additional Resources
UKG Compensation Proposals Guide for Managers