Gallagher’s compensation and rewards team published a piece this spring making the case that, in 2026, generic market data isn’t good enough anymore.

Industry-targeted benchmarking, the firm argues, has become a strategic necessity: broad “all-industry” averages don’t capture what employers actually face on the ground, and as pay transparency laws spread, organizations need “defensible, sector-aligned data” to explain their pay decisions. The argument is right, and it’s a useful one for any Total Rewards leader heading into next year’s planning cycle.

Here’s what we think this means for HR and Total Rewards leaders designing variable comp programs. Gallagher is talking mostly about salary ranges — getting the right peer data so your bands hold up. But the same transparency pressure that’s forcing employers to publish and defend their pay ranges is coming for the part of pay that’s far harder to defend: the bonus. Benchmarking can tell you what a target bonus should be for a role in your sector. It cannot tell you whether the plan that delivers that bonus will make sense to the person earning it once they’re allowed to see how it works. And increasingly, they’re allowed to see.

That’s the gap we’d flag. A salary range is a number. A bonus plan is a mechanism — metrics, weightings, thresholds, modifiers, discretion — and transparency doesn’t just expose the number, it exposes the logic. A range can be wrong by a few percent and still look reasonable; a bonus plan that doesn’t hold together gets exposed in a single payout conversation, multiplied across everyone who got the same explanation. In our experience, plenty of bonus programs benchmark beautifully and collapse the moment an employee asks, “so how was this actually calculated?” Here are the principles we’d hold onto as transparency makes that question routine.

1. Benchmark the opportunity. Then pressure-test the explanation.

Sector data is genuinely valuable for setting the size of the bonus opportunity — Gallagher is right that an all-industry average can lead you to over- or under-invest. But benchmarking answers “how much,” not “why this amount, for this person, this year.” Once you’ve set a competitive target, run the second test that almost nobody runs: can a manager explain the payout to the employee in two sentences without reaching for a spreadsheet? If the honest answer is no, the plan isn’t finished, no matter how clean the market data behind the target looks. Transparency turns that second test from optional to unavoidable.

2. A transparent plan has a metric the employee can name.

The fastest way to fail a transparency test is a bonus tied to a measure the employee can’t articulate, let alone influence. When the plan rides on a blended scorecard of eight weighted metrics — three of which are corporate financials the individual has never seen and can’t move — “transparency” just means the employee now gets to watch a number they don’t understand decide their pay. That’s worse than opacity. In our experience, the plans that survive being explained are the ones built on a small number of measures the employee could name from memory and point to their own work behind. If you wouldn’t want to defend a metric out loud to the person it’s paying, take it out.

3. Write the math down before someone asks for it.

There is nothing wrong with discretion in a bonus plan — judgment is often the honest answer to a messy year. What erodes trust is discretion that masquerades as a formula: a plan presented as objective that quietly bends at the end through adjustments no one documented. Transparency is brutal on that gap. Decide, up front, which parts of your plan are formulaic and which are discretionary, and say so plainly. “70% of this is a formula on these two metrics; 30% is your manager’s assessment against these expectations” is a defensible, transparent design — the employee knows exactly which part they control and which part is a judgment call, and can plan accordingly. A plan that looks formulaic but lands wherever leadership needs it to is the thing that turns one awkward payout conversation into a credibility problem across the whole population. People will forgive a discretionary call they were told about in advance. They rarely forgive discovering that the “formula” was never really one.

4. Sector benchmarks set the number. The path from work to payout earns it.

Gallagher’s point that realities differ sharply by industry — a 24/7 clinical workforce versus a multi-shift manufacturing floor versus a client-facing financial team — is exactly right, and it applies to plan design, not just pay levels. The metrics that an employee can actually move differ by role and sector as much as the market rate does. Benchmarking your target to true peers and then bolting on a generic, head-office incentive metric is how you end up with a competitive bonus opportunity attached to a plan nobody on the floor believes in. The sector data should inform the mechanics of the plan, not just the size of the check.

5. If you can’t explain a payout, that’s a design flaw — not a communication problem.

When a bonus outcome surprises and upsets people, the instinct is to fix the messaging — a better email, a clearer statement, a manager talking point. Sometimes that’s the issue. More often, an outcome that can’t be explained simply is telling you something true about the plan: it’s too complex, or its logic doesn’t survive contact with the people it’s paying. Transparency removes the option of papering over that with communication. The good news is that this cuts both ways. A plan that’s clean enough to explain is also a plan you can show — and a bonus an employee understands and can trace back to their own work is worth more, in retention and motivation, than a larger one they can’t. Legibility isn’t a constraint on a good incentive. It’s part of what makes it one.

So Gallagher is right that 2026 rewards the organizations with the right data and the discipline to defend their decisions. We’d just push the point one layer further than the salary band. The real transparency test isn’t whether your ranges are benchmarked to the right peers — it’s whether the bonus plan riding on top of those numbers still makes sense when you have to read it out loud to the person earning it. Get the data right, absolutely. Then make sure the plan it feeds is one you’d be glad to explain.

If you’re looking for tools to simplify how you manage and administer bonuses — and to give employees a clear, defensible view of how their incentive pay actually works — let’s talk.