What is a Salary Review?

Salary review is when employers pay particular attention to their employees’ wages annually or bi-annually. It aims to determine whether there are any disparities among employees for similar jobs and alleviate any perceived imbalance. Salary reviews act as morale boosters for employees who see their achievements recognized. Employers can also use them to identify gaps in their business operations, such as areas where staffing changes may be needed or where general compensation practices need updating.

Importance of Salary Reviews

Timely salary reviews are essential for company growth and to create a high-performing team. When leadership acknowledges the employees’ performances and does salary reviews to compensate them, it results in employee satisfaction. Here are a few important things that salary review impacts-

• It compensates the high-performing team members.
• It improves morale and encourages employees to perform better.
• It assesses the current salaries of employees.
• It addresses employees’ concerns regarding compensation and salaries.

How often should you have salary reviews?

Most companies conduct yearly salary reviews. However, doing salary reviews every six months can also be a good idea for companies that want to focus on employee satisfaction. Salary reviews don’t necessarily mean a salary hike; they mean employees’ salaries will be compared to the market standard and their responsibilities. Then, if they are paid unfairly, the salary will be reviewed.

How can you prepare for a salary review?

Salary reviews can be a hectic process for HRs, but preparing for it beforehand can make the process less complicated. Here are a few things you can do to prepare for a salary review:

• Evaluate the company’s budget for salary increases and bonuses for the review period
• Analyze average salary benchmarks in the market for each role to determine fair and competitive pay
• Conduct an internal audit to identify any pay discrepancies between employees in similar roles
• Review employee contracts to understand any clauses that may impact the review
• Reread and analyze job descriptions to ensure they accurately reflect role expectations
• Gather performance data on each employee’s achievements, goals, and areas for improvement
• Ask employees to self-evaluate their performance and share expectations
• Determine the desired salary adjustments for each employee based on their performance and market benchmarks
• Prepare talking points to discuss the reasons for salary decisions with each employee
• Educate managers on how to conduct fair and effective salary reviews
• Communicate salary changes and effective dates to employees
• Provide opportunities for growth and development to motivate employees

HRs can make fair salary decisions by thoroughly preparing the budget, process, and individual reviews.

FAQs

What is the difference between salary review and salary increase?

While salary review deals with reviewing the salary structure of employees and ensuring fair compensation according to industry standards, salary increase deals with hiking the salary. A salary review can also lead to a reduced salary for an employee, while a salary increase can only lead to a hike.

Does salary review affect company culture?

Yes, consistent salary reviews ensure that employees are given competitive salaries. It also creates an atmosphere of trust, wherein employees feel like they are being appreciated enough for their work.

How does salary review impact retention?

Employees who feel they are being paid fairly will stay in the organization. Salary reviews reflect the fact that the company cares enough to compensate them for their hard work.