How to Conduct a Salary Review (With Definition and Tips)

By Indeed Editorial Team

Published 6 December 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Those who want to improve company processes and establish career advancement opportunities for employees may want to learn how to conduct a salary review. These reviews require significant communication between members of management and employees. By knowing how to conduct a review, you can improve organisational culture and reward employees for their accomplishments. In this article, we discuss the definition of a salary review and provide you with a guide on how to conduct these reviews.

What is a salary review?

Salary reviews refer to an evaluation process that supervisors use to determine whether the salaries of team members are fair. These reviews also determine whether team members' salary accurately reflect their performance and productivity. Here's how you can implement an effective salary review:

  • Analyse criteria: You can change the criteria for quality reviews to ensure that all employees have the same criteria for reviews. This promotes equity and equal grading for the reviews.

  • Increase training: Train team members who conduct salary and performance reviews to equip them with suitable techniques for gathering more reliable data. This increases overall retention and shows team members how to navigate the company's performance management software.

  • Involve team members: Consider involving your team members, HR leaders and managers in the feedback provided during salary reviews. This ensures the accuracy of your salary review and promotes employee involvement in review processes.

How to conduct a salary review

Here's a guide on how to conduct a salary review:

1. Review your budget

Before you begin your salary review, review the company's budget for employee salaries. This helps you decide the amount of money you can provide to team members. If the budget is lower than you currently pay for salaries, you can adjust accordingly. You can also consider increasing salaries if your budget is larger than you expected. The budget review depends on various external factors, like current trends and company finances.

Related: 20 Tips on How to Negotiate Salary in an Email

2. Determine your objectives

Consider the objectives of your salary review, along with how much money you want to spend on salaries. While determining your objectives, you can decide whether you want to determine salaries based on factors like experience or productivity. You may also want to decide the scope of the salary review and how long the review process lasts. Consider your expectations of employees and inform them of how you plan to evaluate them before you begin the process.

Related: A Complete Guide to Understanding Salary Benchmarking

3. Provide methods of self-evaluation

Before you conduct your salary review, you may want to provide team members and employees with self-evaluation forms. These forms allow the evaluated individuals to rate themselves and provide you with an additional perspective. They may discuss components of their work that you previously missed, or may explain the reasons behind some issues with their productivity. This provides you with the opportunity to congratulate employees on their achievements and provides you with an indication of whose pay you want to increase.

4. Review job descriptions

Consider reviewing job descriptions to determine whether the work employees conduct coincides with their responsibilities. Employees who work beyond their responsibilities may appreciate a pay increase, while those who don't accomplish those responsibilities may require a reduction in pay or demotion. Additionally, reviewing job descriptions provides you with additional viewpoints to discuss in the review.

For example, you can ask them if they believe their responsibilities coincide with their pay, along with whether they believe they have too many responsibilities. When reviewing job descriptions, consider writing notes about which expectations the employee meets and which responsibilities require more improvement.

5. Review policies

When you have a clear opinion of which employees require rewards and what the company budget is, you can review policies to determine the processes for rewarding employees. Your ability to reward employees depends on organisational goals and your budget. When you decide which rewards to provide, remember to be specific. If you lack the budget for a raise, consider providing the employee with a promotion or additional benefits and bonuses.

6. Establish your rating system

You may also want to consider your overall rating system and how you plan to rate the employee's performance. This helps you communicate areas for improvement to them and ensures that all employees receive objective ratings. For example, you can use a performance-based grading system. This includes ratings, such as unsatisfactory, below average, satisfactory, good, excellent and exceptional.

7. Plan your reviews

When you conduct salary reviews, consider how you can plan them to ensure that all conversations remain respectful and that all employees remain satisfied. To do this, you can promote clear communication and discuss employee strengths to ensure that all members of the review feel accepted and appreciated. When discussing areas for improvement, you might provide them with ideas for ways to perform better. If the company lacks policies for salary improvements or promotions, you can discuss this and show transparency to the review members to prevent them from feeling disappointed if they don't receive a reward.

Related: How to Answer Salary Expectations Questions in 3 Simple Steps

8. Review market data

Consider reviewing market data to determine whether the company's internal data coincides with market data. If you notice that recent market data suggests an increase in pay for particular job positions, you may want to consider providing a pay increase. To do this, you can review government statistics and job banks for your industry.

9. Consider contributing factors

When conducting a salary review, there are several components to consider, like employee wages, working hours, accountability and productivity. Additionally, you may want to consider the employee's educational background, along with their competence, flexibility and ability to adapt to their environment. Consider whether they frequently complete additional tasks or work beyond the scope of their responsibilities. You can also ask the employee what they believe to be an important factor in their review. This establishes their priorities within their work and demonstrates transparency.

10. Value employees

Consider how you can show employees that you value their work, and ask them whether they regularly feel valued. When employees feel valued, this improves their overall work and the organisational culture. The salary review is a good opportunity to ask employees about whether they feel valued because it also provides you with insight into their work and ideas for improving overall performance and organisational culture.

Related: What Is an Annual Salary? (Plus How to Calculate It)

11. Explain your pay scale

When discussing the salary review with the individuals involved, consider showing transparency by describing your pay scale to employees. You can describe the reasons behind your decision-making process and whether the employee meets the requirements for rewards. This transparency builds trust between you and the employee and improves overall wellbeing.

12. Complete your project

When you complete your project, consider how your competitors pay their employees. Being a competitive company can contribute to employee satisfaction. Develop reports about the distribution of pay across the organisation, along with whether there are trends with pay inequities or areas of improvement. These reports help determine whether the organisation contains any unintentional biases. Discuss this subject with employees to determine whether they feel their pay is fair.

You can do this by sending anonymous surveys to employees. By maintaining anonymity, employees may feel more comfortable discussing this subject. You can also attach reports about company-wide pay data to emails that you send to all employees.

13. Explain decisions

Following the decisions you make during your salary reviews, you may want to discuss the results and decisions among your team members. You can do so by creating reports and by sending messages about employees who showed significant strengths and productivity. For example, you can email a newsletter that highlights a group of employees who earned promotions because of particular accomplishments. This shows employees which qualities you prioritise, along with how they can work towards their career goals more effectively.

14. Inform affected employees

After conducting a salary review, share your report with relevant employees. You can do this by emailing them or by providing them with a hard copy of their evaluation. Consider providing them with significant positive feedback to balance any constructive criticism. If you provide some employees with salary increases or promotions, use this opportunity to inform them of the exact date for which you want to implement these changes. You can also ask them how you can improve the salary review process in the future. This ensures that your team members feel heard.

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