Organizational Wellness

An HR Leader’s Guide to Conducting Salary Reviews

Mar 9, 2023
Last Updated Jun 1, 2023

Imagine you’ve worked the same job for over 20 years and the pay is still the same as the day you were hired. 

Would you stay, or start looking for new opportunities? Probably the latter, so you can hardly expect your employees will be engaged or striving to improve if you don’t offer compensation that matches their performance and average market trends.

If you are looking for ways to improve employee satisfaction and retain top performers, salary reviews are a crucial step. Compensation can be both monetary and non-monetary (think: more paid time off), but either way, you need to keep up with the competition. SHRM reportsthat, as of December 2021, 51% of employers expect average merit increases of at least 5%. How does your organization compare?

What Is a Salary Review?

As an HR professional, you get to handle a variety of reviews, from performance reviews to employee evaluations. But have you ever thought about evaluating the salaries of your employees to see if they reflect the work for that position? The primary purpose of a salary review is to determine if employees should receive a salary increase based on their performance and average market salaries. Similar to a performance review, a salary review includes an HR representative or line manager and individual employees.

The frequency of salary reviews depends on the needs of your company and employees, but most standards suggest an annual salary review. It’s a great time to reward high-performance work and incentivize employees to stay in their current positions.

Why Are Salary Reviews Important?

There is a fair amount of overlap between performance and salary reviews, so you may be wondering why you should bother with the latter. The short answer is that compensation plays a huge role in both job performance and employee retention. Eighty-one percent of workerssay that their productivity improves when they are paid fairly. If the pay doesn’t match the work, people will find better positions that do. It is important to reward high performers if you want them to stick around, and regular salary reviews can help ensure that your company is offering competitive compensation. 

Not only does it provide a chance to align compensation with performance, it also facilitates open and honest communication between employees and their employers. When there is open conversation around sometimes awkward topics like money, employees are more likely to feel comfortable bringing up their concerns related to the role and accompanying salary. And of course, all of these things combine to improve morale, engagement, and company culture.

What Is Discussed in an Effective Salary Review?

There are a few main things to look at during a salary review: the employee’s current pay, the market average pay, and the employee’s performance. It is important to offer pay that is comparable to similar positions at other companies, but most salary increases are a result of positive performance. Through your research and discussion with the employee, you can determine whether the current compensation reflects their performance or if they deserve higher pay.

Along with discussions about compensation, a salary review is a good time to discuss employees’ career aspirations and their goals for the future. If you do, you can examine how employee goals align with company goals and discuss opportunities for growth within the company.

Unfortunately, not all salary reviews come with good news. If you have an employee that is not getting a raise, take the time to discuss the reasons for this decision with them, as well as ways that they can improve their performance to increase the chance of a raise at the next review.

How to Prepare for a Salary Review

Preparation is key to ensuring that the review is a positive experience for all parties involved. So what do you need to do beforehand?

For the Employee

If you know that you have a salary review coming up, you may want to take the time to research the salaries of comparable positions so that you can advocate for fair compensation. You can also prepare a list of your accomplishments since the last review to demonstrate your performance and how you have earned an increase in pay. And if you are interested in growth opportunities, come armed with some goals and objectives that demonstrate you are being proactive about your future with the company. 

For the HR Representative

HR representatives, or managers responsible for salary reviews, should research the market salary rates for positions within their organization to determine how the company’s pay compares to others in the industry. You can check out previous reviews for notes on any goals that were set so that you can measure progress and reward it accordingly. Check for any disparities in the pay rates at your organization and make sure you are consistent about the compensation for similar positions and workloads. 

Part of the salary review process is training managers on better performance management and communicating about company goals and objectives so that everyone is on the same page and employees have the opportunity to excel.

If You Need Better Benefits, Talk to Gympass

When potential employees consider your company, they want to know that you offer competitive pay and benefits that they can actually, well, benefitfrom. Conducting annual salary reviews can be a powerful tool that helps your company stay at the forefront of the competition and improve employee satisfaction and retention. 

For more information about how the benefits you offer can make a difference, talk to a Wellbeing Specialistat Gympass!

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Gympass Editorial Team

The Gympass Editorial Team empowers HR leaders to support worker wellbeing. Our original research, trend analyses, and helpful how-tos provide the tools they need to improve workforce wellness in today's fast-shifting professional landscape.


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