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How to set salary raises step-by-step

Telma Le Guen

Setting salary raises equitably requires a clear, structured approach. 


Here's an example of some steps to consider:


◾ Gather Market Data

→ Use reliable salary surveys.

→ Compare your current pay levels to market averages.


[The assumption is that your organisation has performed job levelling, which is critical for correct benchmarking. If not, that is step 1. ]


◾ Identify Macroeconomic Factors/Budget

→ Consider inflation, labour market supply/demand, etc.

→ Set a budget also factoring company financial performance.


◾ Audit for Pay Equity

→ Check for any pay gaps based on gender, race, and/or job levels.

→ Flag any disparities for correction before applying raises.


◾ Factor in Internal Equity

→ Compare pay within the same job families and seniority levels.

→ Ensure pay raises do not create compression issues (e.g., new hires earning more than senior staff).


◾ Create a Salary Increase Matrix (optional)

→ Define raise ranges based on performance ratings and years of service.

→ Example: High performers get 4-5%, solid performers get 2-3%, etc.

→ This is optional, but may be useful to support line managers in their decision making. It also implies performance management inputs.


◾ Document and Communicate

→ Write down the criteria and reasoning for each decision.

→ Share the guidelines transparently with managers (and employees if you are at that phase of pay transparency).


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This step-by-step approach ensures you handle salary raises in a way that’s fair, consistent, and aligned with your company’s pay strategy.

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