Definition
A regular process, typically conducted annually, where an employer reviews and potentially adjusts employee pay levels. The review considers factors including business performance, market benchmarking, inflation, individual performance, and internal pay equity.
UK Context
There is no UK statutory requirement for annual pay reviews (except where the contract requires it), but they are standard practice. Employers must ensure pay decisions comply with equal pay legislation under the Equality Act 2010. Companies with 250 or more employees must also consider the implications for their gender pay gap reporting.
Best Practices
- Benchmark salaries against market data using reputable salary surveys relevant to your sector and location
- Communicate the pay review process, criteria, and timeline clearly to all employees
- Analyse pay review outcomes for any adverse impact on protected groups before finalising decisions
Frequently Asked Questions
Is an employer legally required to give annual pay rises?
Not unless the employment contract or collective agreement requires it. However, employers must ensure pay does not fall below the National Minimum Wage when rates increase. Failing to review pay regularly can lead to retention problems and pay inequity.
What factors should be considered in a pay review?
Key factors include business affordability, market rates for comparable roles, inflation, individual performance, internal equity across similar roles, changes in role scope or responsibilities, and any collective bargaining agreements. The weighting given to each factor depends on the organisation's pay philosophy.