Salary Review

What is Salary Review

A salary review, also known as a compensation review or performance review (although with a strong focus on compensation), is the process by which companies evaluate and potentially adjust an employee's salary based on their performance, experience, and market factors. It's typically conducted annually or biannually, often coinciding with performance reviews.

Here are some key aspects of salary reviews:


  • Ensure fair compensation: Reviews help companies assess whether employees are being paid competitively within the industry and relative to their peers.
  • Recognize performance: Salary adjustments can reward strong performance and motivate employees to continue excelling.
  • Maintain employee satisfaction: Competitive compensation helps retain valuable talent and attract new skilled individuals.
  • Align with company goals: Salaries should reflect the value employees bring to the company and support its overall objectives.

How it works

  • Performance evaluation: Reviews often utilize existing performance review data to assess individual contributions and achievements.
  • Market research: Companies analyze industry standards and competitor compensation data to determine relevant salary ranges.
  • Internal factors: Factors like experience, tenure, and specific skills within the company are also considered.
  • Salary proposal: Based on the above factors, managers propose a salary adjustment (increase, decrease, or no change).
  • Negotiation and approval: Employees may have opportunities to discuss the proposed adjustment with their managers.
  • Communication: Final decisions are communicated to employees clearly and transparently.


  • Fair and competitive compensation: Reduces pay disparity and attracts and retains top talent.
  • Increased employee motivation and engagement: Recognizing performance financially can boost morale and productivity.
  • Improved company culture: Fosters a sense of value and appreciation for employees' contributions.
  • Strategic talent management: Aligns compensation with strategic workforce goals.


  • Objectivity: Ensuring evaluations and adjustments are fair and unbiased can be complex.
  • Budget constraints: Companies need to balance individual needs with financial limitations.
  • Employee communication: Transparency and clear communication throughout the process are crucial.
  • Data accuracy: Reliable performance data and market research are essential for sound decisions.

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