From Stagnation to Progress: How Salary Reviews Drive Career Growth
When employees feel like their career isn’t progressing, feelings of boredom and disengagement can start to creep in. And we know that unmotivated, and uninspired employees aren’t likely to feel fulfilled or do their best work. This kind of career stagnation doesn’t only spell disaster for employee engagement and productivity — but also impacts business performance overall.
Instead of leaving employees to feel like their career is going nowhere fast, companies need to tap into what motivates and drives individual success. While this is individual, one key motivator that impacts most employees is pay… which shouldn't be a surprise!
A 2022 survey by Gallup found that for 64% of employees, pay is the most significant factor they consider when deciding whether to leave their current employer. That means one of the most important steps companies can take is to consider how their pay structure impacts employee attraction and retention.
Embedding a regular compensation review process into your policies can help drive career growth while also boosting motivation and retention. But knowing how to implement this equitably can be a challenge. In this article, we’ll tell you everything you need to know.
Pay reviews 101
Pay reviews are an essential part of a compensation philosophy. They highlight potential inequities alongside reassuring employees they’re being paid fairly. While many companies traditionally completed compensation reviews on an annual basis, others are now switching to a six-monthly or quarterly review cycle.
To be successful, your salary review process should include the following steps:
- Budget planning
- Using the right software
- Defining your parameters
- Collaborating with people managers
- Communicating the process with employees
A little later in this article, we’ll take a closer look at what best practices look like for each of those steps.
How do pay reviews help motivate employees?
When employees feel like their career is stagnating, or they’re not being fairly compensated, they’re far more likely to leave their jobs. A 2022 survey by McKinsey & Company found that lack of career advancement and inadequate compensation are the top two reasons given when employees quit their jobs. That statistic alone should be enough to encourage company leaders to overhaul their processes!
If you’re concerned that some of your team might be suffering from career stagnation, here are some warning signs to look out for:
- Employees seem bored and disengaged
- There are few opportunities for them to learn new skills
- Pay rises are few and far between, or completely unheard of
- There are signs of friction between team members
- Employees aren’t offered promotions or opportunities to develop their career
Offering regular pay reviews is one of the best ways for companies to ensure their employees don’t feel like they’re either at a career standstill or not being paid fairly.
Conducting regular pay reviews helps illustrate your commitment to fair and equitable pay, and is an essential part of addressing pay disparities (for example if one employee is getting paid less than someone else in an equivalent role).
In a competitive market, finding ways to reduce employee turnover is key. One of the best ways to achieve this is to embed regular pay reviews and opportunities for development into your company culture.
Forward-thinking companies are already placing learning and development at the centre of their workplace policies — in direct response to employee demand. LinkedIn’s 2022 Workplace Learning Report found that employees who feel as though their skills aren’t valued are ten times more likely to look for a new job.
Internal mobility is also a higher priority for many companies, as leaders realise it’s often easier to develop the skills of existing employees and encourage them to develop their careers than it is to attract new talent. Making time for your annual compensation review process can enable these kinds of conversations to take place.
Compensation reviews help build a strong company culture, where employees can trust that their effort is recognised and rewarded.
In turn, this can boost individual engagement and performance. When employees are engaged, there are some pretty significant benefits for the company they work for as well. A 2020 survey by Gallup found the benefits of employee engagement are indeed far-reaching, and include:
- 18% increase in productivity
- 66% increase in employee wellbeing
- 18-43% decrease in employee turnover (depending on the turnover of the organization)
That’s not all though, because the same survey found that engaged employees also lead to a 23% increase in profitability at the companies they work for.
Compensation review process best practices
Knowing you need to conduct pay reviews is one thing — but implementing this process is another entirely. At Figures, we recommend following best practices, and to make things as easy as possible, we’ve outlined what that might look like at each stage of the pay review process.
Click here to read the ultimate compensation review process guide
Before starting the pay review process, it’s essential to allocate a budget for any pay increases. While the ownership of this may vary depending on your company’s size and structure, it should always include details of what kind of increases are anticipated
Some companies decide to use a general salary increase of a set percentage for all employees, while others choose a market adjustment increase or merit increases designed to reward individual performance.
Using the right software
Inputting and reviewing individual pay review data can be a time-consuming task, especially for larger companies.
To make things easier, consider using the Figures beta salary review template.
It includes tabs for your global budget, parameters, employee information, and calibration details. Just fill out the details in the employee tab — and our template will do the rest of the hard work for you!
Defining your pay review process parameters
When calculating pay reviews, you’ll need to take into account a range of parameters including things like inflation rates, exchange rates, and if you’re conducting merit-based reviews, a merit matrix to help determine fair salary increases that are still within budget.
Collaborating with people managers
Rather than leave managers to approach reviews with their own approaches, a more efficient approach is to use the same general parameters that you defined in the previous step, and apply these across every pay review.
In addition to saving time by standardising the process, this approach also makes it easier to justify any pay decisions, because they’re always backed up by evidence and a fair process. It’s also important to build in some time to calibrate the results of all pay reviews, to help drive consistency.
Communicating the process with employees
Employees need to understand how decisions are made during the pay review process. A compensation communication plan helps define this process by outlining exactly how all review results should be delivered. Usually, a face-to-face conversation is recommended over written communication.
It’s also a good idea to outline the process that your pay reviews follow, so employees understand how their reviews are calculated. That means even if they’re not happy with the result, they’ll feel informed.
Boost employee engagement and career growth — with pay reviews done right.
You already know that compensation is key to happy employees. Now it’s time to learn how you can make your compensation that much easier with Figures.