What is a salary review

A salary review is a process in which an organization evaluates the salaries of its employees to ensure that they are competitive and fair. 

The salary review process is a fundamental part of human resources management and plays an important role in employee retention, improving job satisfaction, and boosting productivity.

What is a salary review?

A salary review is an important tool for organizations to ensure that their employees are fairly compensated and that their salaries align with market rates.

A salary review is typically done on an annual or semi-annual basis. The process is important for several reasons, such as:

• Allows an employee to be fairly compensated for the work they do.
• Ensures that an employee's pay remains competitive with the current job market.
• Motivates and retains employees.
• Maintain fairness within an organization.

Salary reviews and performance management are connected as an employee's work performance is typically one of the main factors considered during a salary review.

Why are salary reviews important?

Salary reviews are a critical part of any successful organization. HR leaders who invest time and effort in regular salary reviews will notice the following benefits. 

Ensure fair compensation

The salary review process allows employees to be fairly compensated for their work, which is important when making employees feel valued and appreciated. 

Remain competitive

Conducting a salary survey and applying key findings ensures that an employee's pay remains competitive with the current job market. 

Attract and retain top talent

If a business wants to attract and retain top talent and prevent employees from leaving for higher-paying jobs elsewhere, then a salary review is an important step in management.

Boost morale

Fair compensation improves morale and motivation, contributing to a positive company culture. In the process, salary reviews help to maintain fairness and equity within an organization.

Steps for HR leaders to implement effective salary reviews

To implement effective salary reviews, it is important to follow a clear and structured process that involves input from both the employee and the employer.

Consider the following steps as a starting point: 

• Set clear goals and objectives for the salary review process.
• Develop a structured and transparent methodology for evaluating employee pay.
• Communicate the salary review process to all employees.
• Collect and analyze data on the current job market, considering the average salary for the job requirements and industry pay trends.
• Involve employees in the salary review by encouraging their input and feedback during performance reviews and one-on-one meetings.
• Consider factors such as job performance, experience, education, and responsibilities when evaluating employee pay — as well as the company’s success.
• Make adjustments to employee pay as appropriate based on the findings of the salary review.
• Provide employees with clear and transparent explanations for any pay increases
• Follow up with employees after the salary review to ensure they are satisfied with the outcome.

What impact do salary reviews have on company culture?

Salary reviews have a significant impact on company culture. When done effectively, salary reviews foster a sense of fairness and equality within the workplace. They also offer employees a sense of transparency and trust in the company, as they know that their compensation is being evaluated and determined fairly and objectively. 

On the other hand, if salary reviews are not handled properly, they can create resentment and dissatisfaction among employees. For example, if employees feel that they are not being paid fairly in comparison to their peers or if they are not being given an adequate salary increase, they may become disengaged and unproductive. 

The six-month salary review process

Some companies conduct an annual salary review and reflect on the past year, while others prefer to reassess employee salaries twice a year. 

Other companies conduct a six-month salary review and discuss employee performance after a new employee joins the team.

In this instance, the six-month salary review is a common practice where employees are evaluated and offered a higher salary increase after six months of working for a company. 

The manager or HR representative assesses the employee's performance and contributions to the company over the past six months and considers any relevant industry benchmarks. 

The benefits of the six-month salary review include the following:

• Provides employees with a clear timeline for when they can expect a salary increase if they are eligible. 
• Motivate employees and encourage them to work hard to meet the metrics for a raise.
• Allows the company to assess the performance and contributions of its employees regularly and to make adjustments to employee salaries accordingly, ensuring fair compensation.
• Provides employees with the opportunity to discuss their new goals and aspirations with their manager and to receive feedback on their performance. 
• Foster a sense of transparency and trust within the company, as employees know their compensation is being evaluated regularly.