Five must-know answers to your pay review FAQs

Richmal Price, Payroll Expert

May 29 2019

Staff always want to earn more. And because you’re a good boss, you want to pay a fair wage. But you also don’t want to end up shelling out more than you need to on salaries. You’re in luck. There’s a way to set the right pay for your staff without breaking the bank. It’s called a pay review, and it could save you a lot of money…

  1. What’s a pay review?

It’s a meeting between you and your employee to talk about their salary and what they’ll earn in the next financial year.

  1. I didn’t include a right to regular pay reviews in my staff contracts. Why should I do them?

You might be reluctant to review your employee’s wage, simply because it means you might have to pay them more. But if you don’t get pay right, your employee will leave. And it’ll cost you more in the long run. Why? Because hiring your employee’s replacement will take more time, effort and training than giving your current employee a slight pay increase.

  1. So, how do I prepare for a pay review meeting?

First, ask yourself can I afford a pay rise? If you can’t, the answer to question five will help you. Before you set up any pay review meetings, look at last year’s profits and your expected growth. Then, check your employee’s salary against what your competitors offer. For example, you might discover your business rival recently advertised a role almost identical to your employee’s but is paying a lower salary. This could give you good grounds not to increase their salary because you already pay above the market rate—and you can prove it. But don’t just base your decision on one vacancy that offers more than you do. Research rates of pay across several different employers so whatever you decide, you know you’re being fair. Finally, review employee performance. Do they get good feedback from clients and staff? Do they exceed your targets? Be sure they’ve earned a pay rise before you offer it. Because you won’t be able to stop paying a higher rate if you change your mind.

  1. If I decide to offer my employee a salary increase, when do I need to start paying it?

Once you’ve agreed to a pay increase, write to your employee and tell them when it’ll take effect. Usually, it’ll be from the next month in your payroll.

  1. I can’t afford to give an employee a pay rise, even though they deserve one. What should I do?

Sometimes, your business budget doesn’t allow you to award a pay increase. But there are other benefits you could offer your employee to soften the blow. You could give them a day off for their birthday, offer flexible working or provide training opportunities to progress their career. And depending on if business picks up, you could offer a mid-year review to reassess your employee’s salary. Need to know how a pay review will work in your business? Call us on 0800 028 2420

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