6 tips for salary review season

While it might feel like the year has only just kicked off, 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.

Heading into the EOFY can be a bit of a minefield for business leaders when it comes to staying on top of pay compliance, especially if you’re not spending your weekends researching employment legislation. But it’s a crucial time to make sure you’re doing right by your people and staying on top of employer obligations.

To help you navigate this season we’ve pulled together six 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; and/or
• you don’t both spend the whole conversation distracted by the potential discussion about pay rise at the end.

P.S On 15 May we're hosting a webinar Purposeful Performance Conversations if you're looking for some performance review tips. Sign up here.

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? Falling behind? Paying above? 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 15% over the last 3 years and a salary that was historically ‘above Award’ may no longer be.  To ensure the salaries you're paying encompass all the Award entitlements you're expecting them to, we recommend you undertake a BOOT (Better Off Overall Test). And If you're thinking “what’s BOOT?” – let’s chat.

3. Communicate

If you have a formal process for salary reviews and this occurs annually, make sure people are aware. 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.

It’s also a good idea to make sure the timing of both reviews are shared ahead of time, that way they can ensure they are clear on their opportunities to share their feedback.

4. 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 mean an annual increase!

It can be important to make sure your employees know that a salary review is not automatically an increase. It’s about committing to check, not committing to give!

5. *Unless there is a guarantee

This part is why it’s important to do your homework first! The decision to provide an annual increase may be taken out of your hands if:

• your employees are paid at or very close to the minimum Award wage (there are usually annual increases to this 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); and/or
• 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

Some key considerations relating to salary increases across your business are:

• Did the business make a profit? I.e., is there actually any extra money 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 is the CPI increase this year, or what was the % increase to minimum wages? (There is no requirement to increase according to these if not paying in line with the minimum, but they can help to guide decision making and meet expectations).
• The cost to replace – both financially, mentally and culturally – and decide whether an increase to support retention is an appropriate, or necessary, strategy.

BONUS TIP: Consider bonuses

If you are concerned about your wages going up and up each year and are unsure about what the future might look like for your business or industry, you could consider whether a one-off bonus might be a better way to show your appreciation and reinforce the behaviour and performance that has been demonstrated, without locking you in to a higher salary ongoing.

Need some help with those HR-to-dos? Let's chat!

As we said to begin with, keeping up with this legislation is not always the easiest thing, especially when keeping up comes with multiple spreadsheets and lofty expectations from staff. If this is something you feel your business needs to review, you can book in a call with one of our HR Partners to give you some guidance and peace of mind.