How to navigate the salary review process
As the salary review period approaches, are you prepared to manage the process effectively?
A fair and motivating reward strategy can improve employee retention, productivity and engagement. Effective salary reviews are essential to ensuring your team members feel appreciated and remain dedicated to their performance. While many employers will try to circumnavigate this by providing other benefits, employers care primarily about their remuneration. After all, a salary increase is what helps them pay their bills and experience a higher standard of living, especially during a cost of living crisis.
Our reward and people advisory experts have provided their insights and discussed how employers can better navigate the salary review process in this webinar. They cover how a robust salary review process can enhance your employee value proposition and ensure that you can retain top talent and keep your people happy, beyond just providing them with what’s expected.
Understanding the salary review process
A salary review is an evaluation process conducted by a professional organisation seeking to assess and adjust the compensation levels of its employees. It is a key component that should be considered when looking at how to develop a rewards strategy that works for both your business and your employees.
The primary objective of a salary review is to ensure that employees are fairly compensated based on their contributions, performance, market standards, and business goals. The outcome of a salary review may result in salary increases, changes in role, or an overhaul of the total reward system, which can impact recruitment and retention.
How often should a salary be reviewed?
Determining the right frequency for conducting salary reviews is essential to ensure that employees’ compensation remains competitive and aligned with the overall business goals. While there isn’t a one-size-fits-all approach that’ll work for all businesses, several factors should be considered when determining the frequency of salary reviews.
Conducting annual salary reviews is a common practice adopted by many businesses. Annual reviews provide a structured framework for assessing employee performance, making adjustments to compensation, and setting new salary benchmarks for the upcoming year.
However, some organisations may choose to implement biannual or quarterly salary reviews to maintain agility and responsiveness to market changes and internal developments.
Preparing for a salary review
While preparing for a salary review can be an anxious time for employers and employees alike, preparation is a sure way to ensure that it goes as smoothly as possible.
There are many things that should be researched and prepared well in advance, but as you can see below, benchmarking salaries and using market data is a good way to avoid any unnecessary disappointment.
Benchmarking salaries: the importance of market research
Salary benchmarking is a critical component of effective human resource management, ensuring that businesses can remain competitive in attracting and retaining top talent within their industry.
Conducting thorough market research and benchmarking salaries against industry standards and comparable roles is essential for informed decision-making.
1. Define your benchmarking criteria
Begin by clearly defining the criteria for benchmarking salaries, including job roles, geographic location, experience levels, and any other relevant factors. This will help ensure that your comparisons are accurate and relevant to your unique needs.
2. Gather comprehensive data
Collect market data on salary ranges for comparable roles within your industry. Look for data points such as median salaries, salary ranges based on experience levels, geographic location, and any additional benefits or perks offered.
3. Review and update regularly
Benchmarking salaries will require you to regularly review and update your data to ensure they remain relevant and competitive over time. Market conditions and salary trends can evolve rapidly, so it’s essential to revisit them at regular intervals.
Steps to conduct an effective salary review
Salary and performance reviews are pivotal moments in an organisation’s human resource management process, ensuring fair compensation for employees while aligning with market standards and company goals.
1. Establish clear objectives
Before commencing the salary review process, you must define clear objectives. Take time to outline the purpose of the review, whether it’s to reward high performers, retain top talent, or ensure remain competitive in the market. Without clear objectives, the entire process can fall flat, wasting everybody’s time while potentially hurting morale.
2. Evaluate individual performance
Assess each employee’s performance objectively, considering factors such as productivity, achievements, skills development, and contributions to team goals. Ensure that performance reviews are fair, consistent, and based on measurable criteria – only then can a salary increase be considered.
3. Consider internal cohesion
Evaluate internal cohesion by comparing salaries within the business, taking into account factors such as job role, experience, and performance. Ensure that compensation is fair and equitable across teams and departments, paying close attention to the average salary for each role and what salary bands are currently in place.
4. Develop a reward and recognition strategy
Based on market data and what’s affordable, develop a reward and recognition strategy that outlines salary adjustments, bonus structures, and other forms of remuneration. Ensure that the strategy is aligned with the business’s overall budget and long-term strategic objectives.
5. Monitor and review regularly
Regularly monitor and review the effectiveness of the corporate compensation plan, making adjustments to ensure continued alignment with market trends. Try to stay proactive in addressing any emerging issues or challenges related to employee compensation. Benchmarking salaries is an effective way to remain competitive when looking at providing a pay increase.
Getting in touch with Moore Kingston Smith
At Moore Kingston Smith People Advisory, our team of employment experts are experienced in helping employers navigate the job market and improve employee retention. No matter your query, our team is ready and willing to help find a solution that works for you, taking into account your unique circumstances.
If you would like to discuss any of the above, or you would simply like to remain competitive so you can attract and retain top talent, please contact us so we can share how to develop a rewards strategy that works for you and your employees.