Conducting a Salary Review

Clare Parkinson

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15 Aug 2018

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There is no law stating that you must increase staff pay each year.

If an employee’s annual salary is looming, there’s a good chance they’ll be expecting a pay rise. Learn how to approach salary reviews here, starting with the meaning of the term.

What is a Salary Review?

A salary review is a meeting with an employee to assess their pay and decide whether to increase their salary. You will usually conduct employee salary reviews once a year.

What is the Purpose of Salary Reviews?

In most cases, the purpose of a salary review is to decide whether the employee deserves a pay rise.

It’s also a meeting to discuss your employee’s achievements and shortcomings in line with their job duties.

In some cases, such as sales roles, you should set out a plan for moving forward—including any changes to their role, their salary, or anything else, such as aspects they must improve on.

If you don’t have an annual salary review policy or process in place, here are the points you should consider:

A Typical Salary Review Process

Start by reviewing your budget. Some money needs to be set aside for the financial budget.

Next, decide whether you’re going to give a pay rise, and if you are, how big it will be. In addition, set out any other objectives or discussion points that you have for the meeting.

Get your employee to self-evaluate their performance and skill progression, and to establish what they think their value is.

This way, you know what they’re expecting in terms of a pay increase.

By going through their work with them over the past year, you can remind yourself of what they’ve accomplished, where they might have struggled, what they’ve learnt, and to what extent they’ve added value to your business.

Analyse average salary benchmarks in your industry and region—both internally and externally—to make sure you’re keeping in line with typical salaries for particular roles.

When you conduct their review, make sure you explain the situation clearly and evaluate your employee fairly.

Review them on the bases of attitude, performance, risk management, and alignment with your company’s values.

Finally, inform them in writing of whether they will receive a change in salary, and when the change will become effective.

Salary Review Letter

If one of your employees thinks that they deserve a pay rise, they have the right to quest a review in writing.

If you know you can’t afford to be issuing pay increases at this time, don’t automatically dismiss the letter. Review it, and determine whether their request is reasonable.

You might find that their request is justifiable, in which case, review your budget, and discuss your employee’s request with them in a formal meeting.

If you can’t afford the pay rise but think your employee deserves one, hold a formal meeting to discuss other benefits that you could offer them in lieu of a pay rise.

Such benefits might include a new commission scheme, or an end-of-year bonus, among other benefits.

If you feel that a salary review letter request is a complaint or victimisation letter, or compares the salaries of co-workers, you would be justified in dismissing the letter.

A salary review letter typically includes:

Talk to an Expert

If you need support with conducting salary reviews or pay benchmarking, speak to Croner’s employment law and reward experts on 01455 858 132.

About the Author

Clare Parkinson has over 20 years’ experience in the Croner Reward business. As Business Manager, Clare leads a team of Reward Consultants who specialise in the delivery of pay and grading related advice, including tailored pay benchmarking and gender pay reports.

Over the years, Clare has contributed to various industry publications on topics such as gender pay, executive remuneration and market pay trends.

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