How to conduct a pay review 

Do you know what to do when an employee requests a pay review? Salary is always at the top of the list when it comes to employee concerns. Open communication between you and your staff is vital to ensure that your employees are happy, inspired to work hard and loyal to the organization. 

Preparation 

Keep an open mind and prepare yourself for a structured, honest discussion. Set a date and ask your employee to come prepared with specific examples as to why they deserve a salary increase. Create a clear agenda and send the outline to your employee so that there is a mutual understanding of expectations for the review. 
 
In order to prepare for the review: 
• Research the market value of the job by speaking to your HR department or by checking the Hays Salary Checker 
• Analyze your employee’s progress by referring back to past performance appraisals and pay reviews. 
• Don’t rely on performance from the immediate past – check that they have been consistently performing since the last review or starting in their role. 
• Have they achieved or completed the initial goals or objectives laid out in their role? What were the results? 
• Have they added value, increased productivity or saved the company money in some way by applying useful skills? 
• How quickly do they respond to special requests and/or urgent tasks? 
• What special projects have they implemented? If so, what were the results? 
• Have they taken on extra responsibility? 
• Have they put in extra hours? 

The review 

Keep the review meeting constructive and positive, as it can be daunting for your employee. 
 
Introduction/Objectives 

• During the introduction, clarify your employee’s current salary and the salary they would like to earn 

• Do not agree to their request immediately, especially if you have to confer with another party 
    

Employee’s justification for the pay raise 

• Ask your employee why he or she deserves the raise with specific examples to validate the justification 

• Ask how he or she has exceeded his or her original job description or objectives. 
    

Explanation of your perspective 

• Cover the areas you researched before the review regarding going market salaries. 

• Discuss their progress compared to the objectives laid out for them. 

• Discuss any areas in which they have exceeded expectations or have fallen short. 
    

Conclusion/Next Steps 

• Give a commitment as to when you should have an answer, if possible, and arrange a follow-up meeting. 

The Decision 

After the review, go through the points raised and consider whether the employee’s request is justified. People can become disheartened if they receive a salary they feel is below their worth, and can cease to be motivated. 
 
Awarding a raise 
Granting a pay raise rewards your employee for a job well done and reenforces their positive behavior. Salary increases drive employee productivity and company loyalty, as your employee will realize they are valued by both you and the organization. 
 
Use the following tactics to ensure their motivation levels stay high: 
•    Set higher future targets and more challenging objectives for the next review. 
•    Provide fresh projects or responsibilities. 
•    Bring forward a performance appraisal to show your continued interest after the pay review. 
 
Declining a raise
Instead of seeing declining the raise as negative, look at it as an opportunity to improve productivity. Have a constructive, realistic conversation that encourages them to improve performance, hit set targets and receive the raise the next time around. 
 
When explaining to your employee why you cannot accept their request, use the following strategies: 
•    Take your employee through how you came to your decision and give them specific examples. 
•    Set new targets for your employee to hit in order to receive the raise and set a date for a reevaluation. 
•    Explain diplomatically how they can improve and how you can help this improvement. 
•    Reaffirm their worth to the company. 
 
There is a possibility that your employee could walk away feeling dejected, ultimately causing them to leave the organization. If your employee does decide to up and leave based on your decision, you are given the opportunity to onboard a replacement that works more effectively. 

Maintain your decision 

Remember why you made your decision in the first place. If you change your mind and award the raise after all, in order to placate your employee, will the reasons you originally turned down the request remain? Chances are, yes. Stick to your decision. Trust your judgment. 
 
A pay raise is not just in recognition of past achievement, it’s an investment in the future and in staff retention. It makes your employees feel valued, appreciated and enthusiastic to develop their careers within your company.