Open for Business


Annual reviews and salary increases


4 April 2023

I know I should be having annual reviews with my team, but if I do won’t they all just ask for more money?

This is a question we often get asked as HR professionals. If you conduct an annual review, does it set in mind of your team that they will receive a salary increase? Based on our experience, yes, this can be the case. So, should you bother to do annual reviews at all if pay increases are not on the agenda?

Fact is some of your team, based on assumptions (or past internal/external experience), may have an expectation of a salary increase following a review. Although it may seem easier to just avoid doing a review all together, if one of your team wants (and expects a salary review) and this isn’t addressed, they are likely to start looking elsewhere for this reward. This means you could end up needing to recruit again! We have some suggestions how you can address this assumption head-on.

If your team assume that reviews = pay increases, you need to address it clearly and quickly. You’ll need to be clear up front about what the expectations are and what the outcomes of the review might be. Sometimes it’s as easy as changing the language you use. At Impact HR we like to call reviews, ‘Career Conversations’. These are the conversations between managers and employees about how they’re going in their role compared to their position description, as well as gaining an understanding of whether they’re feeling challenged or overwhelmed. This process allows you to directly ask questions about readiness for the next step and taking on more responsibility, or if they are happy and challenged where they are now.

Our process for a career conversation is to start by asking employees to rank themselves against the elements of their position description and the expected behaviours of your business. This process also directly asks if they are seeking to take on more responsibility. This allows the business to have the important conversations about what needs to be done for employees to become fully competent in their roles and what needs to be done to gain a promotion (and therefore more money). Another outcome of a Career Conversation is that development opportunities for employees are identified. From this we create a development plan for the next 12 months. This provides the employee with the understanding that you are both investing financially in developing their skills and invested in their growth.

Having said all this, salary reviews and salary increases are part and parcel of having a team. To keep salaries competitive and retain your best performers, you need to review salaries regularly against internal and external markers. Our suggestion, if possible, is to do this away from the time of your career conversation and not close to the end of the financial or calendar year. This helps to break the link between these conversations and an automatic pay rise.

More News? Sign Up for our e-Newsletter?

Join us

Be part of the Impact HR Insights Community

Want to know what's happening in the world of HR? Join our Insights Community and get the latest HR news and best practice updates from the Impact HR team.

You have Successfully Subscribed!