What is a salary review?

A salary review is the evaluation process that managers conduct to determine if employees’ salaries fairly and accurately reflect their work performances.

A thorough salary review depends on these factors:

  • Employee work performance or performance review results
  • Position
  • Employe value in the external job market
  • Designated compensation budget

Why should HR leaders care about salary reviews?

Salary reviews offer employees the chance to receive compensation that matches their work performance. Salary reviews can also improve employee:

  • Retention
  • Engagement
  • Productivity
  • Work performance

What can HR leaders do to implement effective salary reviews?

HR leaders can ensure that the entire pay-for-performance system aligns employee success with the company’s success, values, and goals. HR leaders can incorporate the following components to build a salary review system that engages and retains employees:

  • Analyze the performance review criteria. HR leaders should audit the performance review criteria to check that it rewards the employees who qualify for a raise, and motivates others to boost their work performance.
  • Train managers in performance management. It’s key to educate managers on how to conduct performance reviews that encourage employee retention as well as how to use the company’s performance management software.
  • Consistently involve employees. HR leaders and managers should encourage employees to offer feedback. Incorporating a communication system that allows employees to safely and frequently share their ideas provides HR with valuable inside information that can enhance the company. Moreover, employee involvement in the performance and salary review processes shows a company’s appreciation and value for its employees.
  • Use a merit matrix. Compensation plan managers can build a merit matrix based on the internal and external value of employees. Merit matrixes can guide managers and HR leaders to establish equitable salaries within the company budget.  
  • Conduct salary reviews consistently.  Regular salary reviews can help ensure fair compensation. A notable improvement in employee work performance, for example, could qualify them for a raise following the yearly salary review.

How can effective salary reviews improve company culture?

Honest salary reviews can lead to greater job satisfaction and employee retention. All employees want recognition and fair compensation for their work performance. A company that values its employees and shows it through proper compensation, can build a thriving company culture composed of enthusiastic and motivated individuals.