Do's and Don't of Discussing Salary Revision with your Employees

A successful organisation fosters an environment of mutual respect and good communication between its employees and employers. The subject of salaries is among the primary topics of communication. Whether it is the clearance of salary arrears or an expectation of an increase, employees want transparency from their employers. Nowadays, salary revision depends on various factors, from performance to employee attitude.

Also, it is not surprising that an employee may leave the company if he gets a better package. If, however, he is comfortable with the organisation's culture and believes in its values, even with a better offer, he will think twice.

Rather than thinking negatively, he will try and listen and incorporate his superiors' suggestions. Therefore, it all comes down to communicating with your employees regarding salary revisions, performance, and more. 

We will cover some dos and don'ts of communicating salary adjustments with your employees. 

How are salary arrears connected with salary revision?

Occasionally, organisations may revise salaries in the current month, but the changes are effective from the previous month. For example, if the company performs its annual performance review in June, it may decide to raise an employee's salary from April, the first month of the financial year.

However, since the salaries for April and May have already been paid, the pending salary will be considered as salary arrears. A salary arrear is the balance of an employee's salary for the past month. The company adjusts it in the current or future paycheck. 

Things to consider while discussing salary arrears revision with employees

Following are certain things you must take care of during the discussion of salary revisions.

Do’s

Do proper research about the industry rate

Before putting your revised salary numbers to the employee, always research the industry salary rates for the same job. Maybe even the minimum pay scale is higher than what your employee is getting. Hence, if you don't give them the necessary hike, give them additional perks to compensate. Otherwise, they are more likely to look for another job. It will also help you increase acceptance of your job offers. Thus, proper research will help you validate your final salary revisions.

Do the discussion in the beginning 

Salaries are one of the first discussions before joining. During that discussion, ask about their expectations and talk to them about the company's growth policies. Talk to them about the performance evaluations and what contributes to the promotions.

You can also incorporate half-yearly evaluations of the employees on how they are progressing and what they can do to improve it. All this will keep you and your employees on the same page, and there will be no surprises on the day of salary revision. The employee will also know where they lack and will accept the revision.

Do make it detailed 

During your discussion, don't be vague. Be clear and transparent. Give a detailed salary breakup format of the company. It will include the base salary, rent allowance, dearness allowance, etc. Sometimes the hike is on base salary. The proper knowledge of the salary breakup will not leave room for any confusion. 

Do listen

Communication is a two-way street. Once you have said your points, always ask for the employee’s point of view. Be open to their opinions and suggestions, if any. Open communication will help resolve any of their doubts. It is necessary that employees feel satisfied and just with the result of the discussion. You can even involve their managers to make them feel comfortable discussing anything. 

Be creative

Salary revisions discussion don't necessarily have to be only about numbers. When discussing how to calculate a salary hike percentage for an employee, consider the non-salary incentives. Like, a work-from-home opportunity or some resort membership. Remember, the discussions are about appreciating and recognising employees' value to the organisation. You can always be creative for the same. 

Don'ts

Now, let's talk about what things to avoid during the salary revision discussion. 

Don’t be rigid 

Understand that this communication is a discussion and not a final decision. Thus, you must be open to feedback from your employees. Further, sometimes, some projects or overwork by an employee may be missed by you. Hence, allow employees to put their point of view. Also, if you disagree, let them know you will take their suggestion into account and come back to them. It will make them feel valued and that their voice also matters. 

Don’t react 

It is a natural human reaction to be upset when our expectations are not met. Hence, the same goes for your employee if they don't get the expected salary hikes. They may feel negative about the whole situation. Sit with them patiently and explain the rationale behind the decision. Discuss with them and guide them to improve the numbers in future evaluations.

Don’t delay 

Employees work hard all year to achieve that bonus or promotion. Hence, it is our moral duty not to delay the evaluation, hikes, and promotions as an organisation. If they deserve it, they must be recognised and rewarded. Delaying on it will hamper their motivation and productivity.

Don’t play favourites

Lastly, you may have a better personal relationship with one employee. However, when it comes to salary revision, base it on their professional and work performance and not personal relations. Be neutral, whether on caste, gender, or another thing. 

Final thoughts

This article gives you a detailed overview of all things you must do and avoid when talking about salary revisions with your employees. If there are salary arrears, ensure you don't keep delaying them. It reflects badly on the organisation's reputation.

If you need help with non-salary perks, you can always take the help of professionals like Plum Insurance. Their professional experts will design economical and customised wellness benefits suitable to your employee's needs. It will help you to retain as well as attract the right talent.

FAQ

Q. How does an employee negotiate for a better salary revision if they feel the proposed increase does not match their expectations or industry standards?

An employee should prepare by researching industry salary standards and reflecting on their achievements. They must present their case clearly, highlighting contributions and market benchmarks during the negotiation. It's crucial to stay professional and open to discussion, aiming for a solution that recognizes their value to the company.

Q. Are there any specific criteria or performance metrics that companies commonly use to determine the percentage of salary revision?

Companies often rely on a combination of performance evaluations, achievement of set goals, market rates, and individual contributions to the company's success. They may also consider the employee's role, experience, and tenure. These factors help ensure a fair and transparent approach to salary revisions.

Q. How frequently should salary revisions take place, and does this frequency change based on the employee's role or seniority level?

Salary revisions typically occur annually, aligning with performance review cycles. However, the frequency can vary based on the employee's role, seniority, and the company's policies. High performers or those in rapidly evolving roles may see more frequent revisions to reflect their growing contributions and market demand.