6 tips for salary review season

We’re officially in the final quarter of the financial year. Right now, it’s the lead-up to “salary review season” usually in July when new budgets are being finalised.

The months before are the time to prepare. That means getting across employment legislation, checking pay compliance, and looking into salary benchmarking so you're across industry expectations.

To help you navigate this season, we've pulled together 6 practical tips (plus a bonus one for good measure).
‍

1. Put some space between your salary reviews and performance reviews

You may have heard before that it’s best practice to separate your performance conversations from your salary review conversations. There are a few reasons why this is recommended:

• Employees who receive positive review feedback may (perhaps justifiably) then expect a pay increase to be associated.
• Performance of the individual is likely only one consideration when looking at increasing pay.
• Keeping them separate means neither conversation gets hijacked by the other
‍

2. Do your homework (or get someone to do it for you!)

Before you jump into any conversations or decision-making, it’s worth reviewing how your current salaries stack up. Here’s how:

• Salary Benchmarking: Check how your current pay rates compare to the market. Are you in line with industry standards? Paying above or falling behind? With lots of change and conversations around wage expectations this year it’s especially important to be informed.
• Modern Award Reviews: If there are Awards that apply to your team make sure you’re up to date with any changes and understand what those changes might mean for your team’s pay.
• BOOT Analysis: Modern Award rates have increased significantly over the last 3 years and a salary that was historically ‘above Award’ may no longer be.  A Better Off Overall Test (BOOT) checks whether your salaries still cover all the entitlements they're meant to.
  (If this is something you’re not sure about, it’s worth getting in touch with a HR partner to find out how it could apply to your team.)
  ‍

3. Communicate early

If you have a formal process for salary reviews and this occurs annually, make sure people know when it’s happening. Share the timing early so people can prepare, ask questions, and feel part of the process.

If you have previously always had your salary review and annual review conversations together, communicate with your team and let them know why the change is occurring.
‍

4. Managing expectations

Cost of living pressures are real, and many people are feeling them. It's natural for people to come into salary reviews with higher expectations than usual.

It's also worth remembering that cost of living increases hit businesses too. Rising costs across suppliers, insurance, rent and operations mean the pressure isn't one-sided.

Be transparent about what's driving decisions, whether that's business performance, or market conditions. You don't need to share everything, but a little context goes a long way. When people can understand the "why" they are more likely to feel respected, even when the answer isn't what they hoped for.
‍

5a. There's no guarantee*

A review doesn’t always mean an increase. You might have written in your employment contract or employee handbook that salaries will be reviewed annually, but an annual review does not automatically mean an annual increase.

It's worth making sure your team understands the difference. An annual review is about committing to assessing and considering, not automatically adjusting.

5b. *Unless there is a guarantee

That said, sometimes the decision is made for you, which is why it’s important to do your homework first. A pay increase may be required if:

• Your team are paid at or very close to the minimum Award wage (Award rates typically increase in July each year).
• An employee (or group of employees) are moving from one classification in the Award to another (either based on tenure, experience or new qualifications).
• Your team are covered by an Enterprise Agreement (EA or EBA) that has agreed annual increases included within it.
‍

6.  Fit your oxygen mask first

Before committing to increases across the board, consider the bigger picture:

• Did the business make a profit? I.e., is there actually any extra budget to be spending on staff salaries, or at least a plan for extra income this year to compensate?
• Did an individual/s take on additional responsibilities (e.g., people management) or gain qualifications that should attract a higher salary?
• What was the % increase to minimum wages. This isn’t binding if you're paying above minimum, but they can influence expectations.
• What's the real cost of losing someone? Financially, culturally, and in terms of workload, retention is often cheaper than replacement. In some cases, the salary increase may pay for itself.
  ‍

BONUS TIP: Consider bonuses

Not sure what the next 12 months look like for your business or industry? Offering a one-off bonus could be an alternative. It recognises great work and shows appreciation, without locking you into a higher base salary ongoing.
‍

Need some help with those HR-to-dos?

Staying on top of pay compliance and industry salaries is no small task. If you'd like a hand making sure everything stacks up, get in touch with one of our HR Partners to give you some guidance and peace of mind.