Salary increases

It can be difficult to determine when an employee deserves or requires a salary increase. In order to attract and retain the best employees, we recommend conducting regular remuneration reviews and viewing benchmarking data.

Remuneration reviews may be done in conjunction with your annual performance reviews, as you will likely be linking the employee’s performance to any remuneration increase.

When determining salary increases, there are few common factors to take into consideration.

1. Employee performance. Consider whether the employee has been consistently meeting and exceeding targets and the value they bring to the organisation. Your annual performance reviews should you assist you with this decision.
2. Role scope and responsibilities. Consider whether an employee’s role has grown since their last salary review and they have increased responsibilities. You should also update your position descriptions to reflect these new responsibilities.
3. Current market value. Understanding external market values allows to you ensure you are staying competitive and are paying employees a fair rate. This also provides you with a baseline to work from if you are creating a new role.
4. Skill shortages in your industry. Some roles are harder to fill than other due to nationwide skill shortages. If you currently have someone in one of these hard-to-fill roles, consider retaining them with a higher salary (as opposed to the difficulty of attracting and training a new team member should your current employee move to a competitor).
5. Consumer Price Index. The all-groups Consumer Price Index (CPI) measures household inflation and includes statistics about price change for categories of household expenditure. CPI is important when determining any remuneration increases as it reflects the increased cost of living to employees.
6. Wage Growth. The Wage Price Index measures changes in the price of labour and can be affected by changes in either the public or private sector. Consider how your proposed increase compares with the current index.
7. Annual Award Increases. For employees covered by a Modern Award, there is an annual review of the minimum award wages carried out by the Fair Work Commission around July each year. In order to ensure that your remuneration is at least equal to the minimum wage dictated by each award, you will need to review this each year.

It is important to note that due to recent legislative changes, pay secrecy clauses are now unlawful. You must not include any reference to pay secrecy in any remuneration documents, including contracts and variation letters.

For more information on the above, please contact us on 1300 887 458 and speak with one  of our HR Consultants. If you are interested in learning more about our HR services, including HR Outsourcing, HR Consulting, HR Advisory Services, contact us at enquiries@liquidhr.com.au.