How to conduct a pay review

By Sarah Welfare

The pay review – also known as a pay settlement or award – is one of the basic building blocks of reward and the majority of organisations carry one out each year. They can vary from a cost-of-living increase for all employees negotiated with a trade union to a finely differentiated range of individual increases based on performance, market rates or progression.

Employers may award the same pay increase to all employees at their organisation, or may choose to differentiate between different employee groups (also known as bargaining groups). The pay review process may also include a review of benefits, and other terms and conditions.

While employers take a whole range of factors into account in deciding their pay review – from inflation to comparable rates in the local labour market – affordability will be the biggest concern for most and sometimes a review may result in no pay increase. But even when only a small pay rise is possible, the annual pay review can still provide an opportunity for the organisation to put its reward principles into practice, both through outcomes and through the way the review is carried out.

In this guide, learn about:

• Objectives
• Planning, responsibilities and timetable
• Pay review date
• Duration
• Process overview
• Negotiated pay reviews
• Setting the budget
• Types of pay review
• Factors to take into account
• The cost of living
• Market rates and salary surveys
• Comparable pay awards
• Performance-based awards
• Using a pay matrix
• Reviewing the pay structure
• Other elements of the pay and benefits package
• Pay freezes and cuts
• Checking for equality issues
• Employee communication
• Transparency
• Learning for next time