How to Evaluate, Compensate, and Retain Your Team Before the End of the Year
As the year winds down, many business owners are racing to hit revenue goals, close out projects, and prep for holiday sales. But there’s one critical task that often gets pushed to the side, evaluating your team’s performance and compensation.
If you want to enter the new year with a strong, aligned, and motivated team, this is the time to take a step back and assess how your people are doing and how your business is supporting them.
Let’s walk through what to review before December 31 so you can make smart, intentional decisions about compensation, performance, and retention.
Step 1: Get Clear on Total Compensation
Total compensation isn’t just salary, it’s the full picture of what your employees receive from your business. That includes:
Wages or salary
Bonuses and commissions
Health or retirement benefits
Technology stipends, professional development, or extra PTO
Any other perks or allowances
Take inventory of everything your business provides each team member. You might discover inconsistencies, like one person receiving a stipend others don’t, or outdated benefits that need to be revisited. Clarity here ensures fairness and sets the foundation for smart decisions next year.
Step 2: Update Every Job Description
If someone on your team doesn’t have a job description, or the one they have doesn’t match what they actually do, that’s your signal to fix it. Job descriptions aren’t just HR paperwork; they’re operational tools. They clarify expectations, define scope, and help you assess performance accurately.
Start by writing down what each person actually does today, then adjust or rewrite the job description to match reality. This will help you identify gaps, realign priorities, and set the right goals for 2026.
Step 3: Evaluate Performance Objectively
Forget the corporate “grading system” approach. Instead, look at each person through three simple lenses:
Are they at target (meeting expectations)?
Above target (exceeding expectations)?
Below target (not meeting expectations)?
Document your perspective for each person, and back it up with data; KPIs, milestones, or measurable outcomes whenever possible. This creates a balanced, fair assessment that also gives you a foundation for salary or bonus decisions.
Step 4: Review and Adjust Salaries
Even if you’re not planning major raises, every business should account for cost-of-living adjustments (COLA)—typically 2–3% per year, depending on inflation and market conditions.
Beyond COLA, compare your team’s pay against current market rates. This isn’t about guesswork or AI-generated averages, it’s about making informed decisions that keep your pay competitive. If you can’t afford an HR consultant, benchmark against similar businesses in your network.
From there, decide whether you need to make:
Equity adjustments (to correct inconsistencies)
Performance-based raises (for top contributors)
Retention raises (for key roles you want to keep long-term)
Step 5: Audit Commission Structures
If you have a sales team, now is the time to analyze your commission plan. Look at the data, how much revenue did each person generate? How many deals did they close? What was the net profit after commissions?
If you notice plateauing performance, your commission structure might be part of the problem. Try tiered incentives that reward exceeding targets, not just hitting them. The goal is to align motivation with business outcomes.
Step 6: Review Benefits and Bonuses
If you offer benefits, December is open enrollment season. Review what you currently offer, evaluate costs, and decide if you’ll make changes in the new year. If you don’t offer benefits yet, this is a great time to assess whether it’s time to start.
For bonuses, go back to your annual budget. Did you hit your targets? If so, decide how bonuses will be distributed; cash, equity, trips, or other incentives, and document everything clearly.
Step 7: Write It All Down
Policies protect your business. Once you’ve made all your compensation and performance decisions, document them. Create or update written policies for:
Performance management
Pay-for-performance
Commissions and bonuses
Benefits eligibility and enrollment
If you ever face questions or disputes, you’ll have clarity and consistency to point back to.
The Takeaway
Your people are your greatest asset, and how you handle this process determines how supported, motivated, and loyal they’ll feel heading into the new year.
When you invest time in evaluating performance, pay, and benefits before January, you’re not just cleaning up HR files. You’re building trust, transparency, and alignment, the foundation of every thriving business.
So take the next week to pull those numbers, review those job descriptions, and have the conversations that matter. You’ll start 2026 with a team that feels seen, valued, and ready to grow alongside you.
