How are salary reviews done ?

How are salary reviews done

How are salary reviews done ? Is it done organisation wide (i.e all staff at once) or based on performance and other parameters ?

This is a question that HR professionals as well as line managers are likely to hear numerous times. Here is a general overview.

Most companies do salary reviews for all employees at the same time, although a minority of organisations review salaries upon anniversary of the employee hire date.

Companies have multiple options when it comes to reviewing the salaries of their employees. Read this post for an idea of how the budget for salary increases is determined. Basically the organisation looks both externally and internally.

This will inform how much money can be spent to review the salaries of the employees.

Once they know how much to spend, the company can either :

  • give the same increase to all employees (or, in a variation, to categories of employees. For example, blue collars all get 3% in a manufacturing company, while the white collars all get 1.5%).
  • AND/OR give individual increases to employees. The criteria for deciding the individual increases can be fully discretionary, or based on one or more elements.

The most common criteria for merit increases are the performance rating of the employee, the current base pay of the employee and its position in the salary range for the job (the salary band that the company deems acceptable – this position is often called comparatio), and the market ratio (how well the employee is paid compared to market).

There are numerous other elements which an organisation may consider such as :

    • retention risk,
    • “hot skills”,
    • potential of the employee,
    • or adjustment to market values (above and beyond the regular salary increase) for example.

They can also be things like

    • seniority,
    • tenure in the company,
    • acquiring skills / education
    • or belonging to a special group of employees.

In short there are multiple parts at play here, and each company will have a different philosophy and approach defined to support its current business needs and strategy.


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