Salary revision: Meaning, process, and free letter templates

Salary revisions are crucial for keeping a company competitive in the job market. Employees expect their hard work to be recognised, and one of the most effective ways to do this is by offering fair compensation. By revising salaries regularly, employers show that they value and appreciate their employees' contributions.

In this article, you will learn everything you need to know about salary revisions, including the process, letter formats, and the difference between salary revisions and increments.

What is salary revision?

Salary revision is the process of reviewing and adjusting an employee's total Cost to Company (CTC) based on their performance, industry norms, and market trends. This review typically occurs periodically, such as annually or semi-annually, and is initiated by the employer or HR department.

During a salary revision, the employee’s performance is evaluated to determine if a pay adjustment is required. In addition to performance, their job responsibilities, experience, and skills are also considered when deciding the new salary structure. Based on this evaluation, the salary may be increased to reward contributions or, in some cases, adjusted downward if performance expectations have not been met.

Salary revision process

Employers and HR teams carry out salary revisions by conducting personalised performance reviews for each employee. The salary revision process within a company typically follows these steps:

• Employer meets with senior management to understand employee performance.
• CFO, employer, or payroll manager checks the company's finances and sets a budget for salary revisions.
• HR, reporting managers, and other stakeholders review and approve the salary changes.
• HR and payroll administrators inform employees of their new salaries and update the payroll software.

Reasons for salary revisions

Companies may revise salaries for several key reasons, including:

1. Post-probation pay adjustments: After successfully completing the probation period, employees may receive a new pay structure as agreed upon at the time of hiring.
2. Outdated salary structure: When the current salary structure falls behind market standards, a revision is necessary to retain talent.
3. Promotions: When an employee is promoted, their salary is revised to match the appropriate pay band for the new role.
4. Inflation: To keep up with rising living costs, companies may revise salaries to ensure fair compensation.

Salary revision letter format

Dear [Employee's first name],

We are happy to inform you that your salary has been revised. Effective from [Date], your revised salary will be [Amount] per annum. The updated salary will be reflected in your salary slip for the month of [Effective month].

The salary revision has been made following our company’s review process. All other terms and conditions of your employment remain the same as mentioned in your offer letter.

Please feel free to reach out if you have any questions or need further clarification regarding the details of your revised salary. We appreciate your dedication and the contributions you continue to make to the success of our company.

Best regards,
[Your name]
[Your position]

Tips for conducting salary revision discussions

When approaching salary revision discussions, it's important for employers to keep in mind the following pointers:

1. Research industry salary standards thoroughly.
2. Explain how performance evaluations and salary increases are determined right from the start.
3. Provide a clear breakdown of the revised salary to the employees.
4. Listen to employee opinions and suggestions with an open mind.
5. Take into account non-salary benefits like transport facilities, meal coupons, and other incentives.

Difference between salary revision and salary increment

While a salary revision adjusts the pay structure across the organisation to stay competitive, a salary increment focuses on recognizing and rewarding individual contributions. Learn more about salary increments.
 

Quick summary

Salary revision can act as a strategic tool in retaining talented employees, keeping them motivated, and ensuring their job satisfaction. Employers usually have specific policies and guidelines for the salary revision process, which must be communicated clearly to employees. Managing this process transparently is crucial for avoiding misunderstandings and maintaining high employee morale.

To streamline and manage salary revisions effectively, businesses like yours turn to Zoho Payroll. The cloud-based payroll software offers customisable salary revision template and automates salary calculations, making the salary revision process easier, more accurate, and consistent.

Frequently asked questions