Salary review

What is a salary review?

A salary review is a structured assessment of an employee’s pay to determine whether it remains fair, competitive, and aligned with their role, skills, performance, and current market rates.  

Often carried out as part of an annual salary review, it helps employers make informed compensation decisions, support employee retention, and ensure pay remains consistent across the business.

Why are salary reviews important?

Salary reviews are becoming increasingly important as pay expectations continue to evolve. Research from Reuters found that UK employers expect average pay rises of around 3%-3.5% in 2026, making regular salary benchmarking and compensation reviews essential for staying competitive.

Regular salary reviews help businesses:

• Retain good people by ensuring pay remains competitive

• Reward employees who have taken on more responsibility

• Identify and address pay gaps or inconsistencies

• Support recruitment by keeping salaries in line with market rates

• Make pay decisions based on data rather than assumptions

What factors are considered during a salary review?

Several factors can influence the outcome of a salary review. While employee performance often plays a role, it's rarely the only consideration.

Employers typically look at:

• Current salary compared with market rates

• Skills, experience, and qualifications

• Job responsibilities and recent changes to the role

• Individual performance and achievements

• Internal pay consistency across similar positions

• Company performance and available budgets

Using salary benchmarking alongside these factors helps businesses make fair, informed, and commercially sensible pay decisions.

How does the salary review process work?

A good salary review is about more than deciding whether someone gets a pay rise. It's a chance to step back and ask a simple question: is this employee being paid fairly for the work they do today?

Most salary reviews follow a similar process:

1. Look at the role - Has the job changed since the last review? Have new responsibilities been added?

2. Review performance - Consider achievements, contributions, and overall impact.

3. Check the market - Compare salaries for similar roles using salary benchmarking data.

4. Review internal pay levels - Make sure pay is consistent across comparable positions.

5. Consider budgets - Balance salary decisions with business performance and affordability.

6. Share the outcome - Communicate the decision clearly and explain the reasoning behind it.

Salary review vs pay rise

A salary review is the process of assessing an employee's pay, while a pay rise is one possible outcome of that review. In some cases, a salary review may lead to an increase. In others, pay may stay the same if it is already aligned with market rates and business objectives.

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Salary review vs performance review

A salary review looks at whether an employee's pay remains fair and competitive. A performance review focuses on how well an employee is doing in their role.  

While performance can influence pay decisions, the two reviews serve different purposes and are often conducted separately.

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Salary review example

Imagine a marketing executive at a UK SME earning £32,000 per year. During their annual salary review, the employer looks at their performance, additional responsibilities taken on over the past 12 months, and current market salary data for similar roles.

The review shows that comparable positions are paying between £34,000 and £36,000. The employee has also consistently exceeded targets and now manages key client accounts.  

Based on these factors, the business decides to increase their salary to £35,000, bringing their pay closer to the market rate while recognising their contribution.

Best practices for effective salary reviews

Employees are far more likely to trust the outcome when they understand how decisions are made. A few good practices include:

• Review salaries regularly rather than waiting for issues to arise

• Use salary benchmarking to compare pay against the market

• Apply the same criteria across similar roles

• Consider both performance and job responsibilities

• Keep clear records of decisions and reasoning

• Communicate outcomes openly and professionally

How to manage salary reviews across global teams

Managing salary reviews across multiple countries can be challenging. What counts as competitive pay in the UK may be very different in India or elsewhere.  

Market rates, employee expectations, local regulations, and economic conditions can all vary significantly. To keep salary reviews fair and consistent across global teams:

• Benchmark salaries against local market rates rather than applying one global pay scale

• Use clear review criteria across all locations

• Consider regional economic conditions and cost-of-living changes

• Gather employee feedback and performance data regularly

• Document decisions to ensure consistency and transparency

Of course, gathering salary data and understanding local market expectations isn't always straightforward when you're hiring overseas.

That's where Black Piano can help. You remain fully involved in salary review and compensation decisions, while Black Piano handles the operational side of managing talent in India. From payroll, HR, compliance, and onboarding to local market insights and salary benchmarking support, everything is taken care of under one roof. Learn more about our services.

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