It’s easy to confuse salary revision with terms like a salary increase, increment, structure and the like, so what is salary revision?
Salary revision involves modifying a pay structure, including all primary salary components — before paying salaries to employees within an organisation.
This payroll modification is a broader term for comprehensively reviewing all salary structure components. It differs from a salary increment, in which an increase is made only to a single element of the entire salary structure.
For example, a 15% salary revision means a 15% rise in pay structure components, yet, a 15% salary increment represents a 15% increase in the basic pay or any of the other features of the salary structure.
The components of a salary structure, for the most part, comprises basic pay, pension fund, and gratuity. Nonetheless, some organisations prefer transport allowances, furniture allowances, meal allowances, medical allowances, and utility to form part of the pay structure.
5 Factors Influencing Salary Revision
Salary revision is independent of the appraisal cycle and can be implemented at any time in a fiscal year. So, what is salary revision anchored on? A salary review is influenced by the factors below:
- Business Impact
- Increase in Responsibility
- Long Association
- Employee Gaining Qualification
1. Business Impact
Business impact happens when the benefit of an employee to the company is recognised. The employee’s contribution could be seen in getting new contracts, accessing target customers, or achieving the set target of revenues. Salary revision is done by the senior management, acknowledging employees’ efforts and boosting their morale further towards the organisation’s goal.
This is a common reason for salary revision. Employees are primarily suitable to get a new salary structure according to the pay band whenever someone gets promoted within the organisation.
3. Increase in responsibility
If an employee takes up more tasks than assigned, some organisations may consider salary revision.
4. Long Association
Organisations consider revising the salary of their long-term employees to keep motivating them. Sometimes, people who stay in the organisation for a longer time face the disadvantage of low wages as they don’t meet the pay parity in time. The issue with pay parity comes when a new employee joins the organisation and considers the inflation rate.
5. Employee qualifying
In some cases, employees gain extra qualifications, which build their skills and relevance, thus enhancing better results needed for the job. A better employee equals a better company. A boost in capability will lead to a salary revision as the employee undergoes a transition in job responsibility. In Addition, organisations encourage employees to further career advancement because they tend not to look out for talent to fill other crucial roles.
Once the company is ready to adjust the salary structure, educating and communicating with employees about the changes is vital. Organisations must explain why the pay structure for their current position is changing and the adjustments made in the revised salary.
Why Organisations Carry Out Salary Revisions
Organisations carry out salary revisions for the following reasons:
- When the company’s salary structure doesn’t match the market.
- When it’s agreed, the organisation will implement a new pay structure once an employee successfully completes the probation period.
- To afford a cost-of-living adjustment.
- When a staff is promoted to a new job role.
An effective salary revision can drive higher rates of workplace satisfaction and retention. Employees want recognition and fair remuneration for their performance.
A company that values its employees and shows it through proper staff compensation can build a winning company culture.
How HR leaders can implement beneficial salary reviews
HR leaders can ensure that the entire pay system aligns employee success with the company’s success, values and goals.
For example, HR can leaders can incorporate the following components to build a salary review system that engages and retains employees:
- Analyse performance review criterion
HR leaders should audit the performance criteria to ensure that it rewards staff who qualify for a raise and motivates others to boost their work performance.
- Involve members of staff
Managers and HR leaders should encourage employee feedback via a communication system that gives employees safety and frequently share their ideas. Besides, employee involvement in the performance and salary review processes shows a company’s appreciation and value for its employees.
- Use a merit matrix
Managers can build a merit matrix based on employees’ internal and external values. The merit matrix can guide HR leaders and managers to establish equitable salaries within the company budget.
- Conduct regular salary reviews
Consistent salary reviews can help ensure fair compensation. A notable improvement in employee work performance could qualify them for a raise following the yearly salary review.
While there’s no pre-requisite, legal or otherwise, for an employer to offer salary raises, most employees expect that salary upsurges will be implemented periodically. Employees can also request that their salary be revised based on merit and accomplishments.
Usually, a successful negotiation is neither based on why you need money / why your employer may care about you nor providing additional capital to fund your chosen lifestyle.
Instead, this is about making your request known to your manager and letting them be aware of your accomplishments and contributions.
Organisations should establish appropriate pay grades, maintain updated job descriptions with required skills, and ensure they accurately reflect each position’s core duties. This will help organisations retain talent and stand out as fair, competitive and relevant employers in the job market.
Salary revision is performance and merit-based, which cannot be considered a matter of right or entitlement by each employee.
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