The specifications relevant to the compensation planning procedure are determined.

These include:

• The organizational areas for which compensation planning must be performed

• Provisions that determine the compensation types for which adjustments are allowed
• Conditions regarding the extent of compensation adjustments (such as maximum and minimum compensation adjustments)
• Determination of the financial resources available for compensation to be planned
• Organizational provisions for performing planning (What is the time frame? How are decisions delegated? On which hierarchical levels are compensation plans consolidated and approved?)

When compensation planning is prepared, several alternative specifications can be drafted. On the basis of an evaluation, a decision is made as to whether to adopt a particular draft as a binding specifications package, or to correct existing alternatives, or to create new ones.

A manager checks whether compensation planning is performed by him or herself in his or her area of responsibility, or whether it is delegated in full or in part to lower-level managers. If delegation takes place, specifications are defined in more concrete terms.

A manager creates a compensation plan for those employees who are directly subordinate to him or her.

Several alternatives can be created and evaluated for the compensation plan. Finally, a decision must be reached as to whether to accept one of the alternatives, or to create more alternatives, or to correct existing alternatives.

The accepted compensation plan is released for consolidation.

When consolidation takes place, various compensation subplans are brought together in a comprehensive plan.

Prior to consolidation, a check is performed to ensure that all necessary subplans exist and that they meet the given specifications. If this is not the case, missing subplans can be re-requested and unacceptable plans can be referred back for correction.

Under certain circumstances, individual subplans may meet the specifications while the consolidated compensation plan fails to do so. In this case, individual subplans can be referred back to the persons responsible to be corrected.

The completed, consolidated compensation plan is released and then goes to the next decision level up for further consolidation or approval.

The compensation plan is checked to ensure that plan values are appropriate, and that formal specifications have been observed. A decision is made as to whether the plan is approved or whether corrections are still required.

A manager checks whether a required correction is performed by him or herself in his or her area of responsibility, or whether it is delegated in full or in part to lower-level managers. If delegation takes place, correction specifications are defined in more concrete terms.

The compensation plan is implemented when specifications are adjusted for payroll.

The employee is informed of his or her compensation adjustment.

A check is performed as required or at regular intervals to determine whether the conditions are still valid under which the specifications for compensation planning were defined.

A decision is made as to whether there is a definite need to act, and whether the specifications or the as yet unapproved compensation plans must be corrected.