Performance reviews and salary reviews – there is a difference

Manager and employee sit down to discuss a performance review

Who wouldn’t love a pay rise? When a performance review date pops up in your calendar, you may quickly leap to thinking it's your ticket to a new salary band, but keep in mind a performance review and a salary review are not the same thing. 

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The six-month review

It isn’t uncommon for an employer to mention a six-month performance review as a salve for a potential employee’s disappointment at the salary provided in the job offer. However, new employees often take this as a virtual guarantee of a salary rise in the near future. The impression the employer gives is that accepting the offer on the table today is a mere formality that he or she will correct at the first review.

Of course, there is never such a guarantee. Three, six, nine and 12-month performance reviews are pretty standard in any business, so the employer isn’t necessarily promising anything more than the normal working arrangement. But this approach does lead to an unrealistic expectation that salary increases are a routine and systematic result of performance reviews.

Whether you’re currently looking for a new job or an employer, it’s important to be clear on exactly what you’re agreeing to at this stage. Will the meeting review performance or salary?

Good performance doesn't equal a pay rise

Even if there is firm assurance that the six-month review is linked to salary review, it doesn’t mean the business has to agree to a payrise when the time comes.

First, average performance may not be enough to start a salary negotiation. If the employee’s performance is merely “good” or "adequate", it’s unlikely your manager will want to pay more for simply meeting the job requirements. Additionally, your first six months, and up to 12 months in any new role can often require a large amount of learning -- including learning new systems, process and building relationships with key stakeholders. This can sometimes means that the full potential value your employer expects from you may take some time to come into fruition.  

For an employer to see the benefit of increasing your salary, the performance review needs to demonstrate how the employee delivers above the expected value to the business. And that means above average or exceptional performance.

When's a good time to ask for a pay rise?

A performance review may be a good place to initiate a discussion for a higher salary or propose a salary review. According to our research employees working in finance and accounting are most likely to be successful if they make a case for a higher salary during their performance review (36%). Making a request at a business critical juncture can also be an effective strategy, with 28% of FDs and CFOs recommending the best time to ask is at the start of a major project or when taking on new responsibility. One-in-ten (11%) believe the best time to request higher remuneration is at the end of a major project.

But when you have the meeting, it will be up to you to make the case. This is when you can pull out those exceptional results that you achieved, recent awards and recognition you've received. This is the time to document when you have delivered extra value above and beyond your job description.

Just be aware that even if your employer agrees with your case, he or she still may be unable to give you what you want – for now at least. The major factors behind firms being in a position to increase their budget for employee remuneration are company performance (50%) and the economic and political climate (30%) according to CFOs.

Success can be its own reward

Even though an individual’s performance may be exceptional, if the business overall is doing less well, it might be more damaging to the bottom line to award that pay rise. And the bottom line will always win in any such salary discussion.

Sometimes companies reward good performance in non-monetary ways. A more senior title or performance-related award can boost future chances of promotion or career advancement, or flexible benefits or remote working may be a way to improve your work--life balance which can be another form of increased benefit to reward success.

Management recognition, leadership development or exciting new projects can sometimes provide greater job satisfaction. Recognition of outstanding performance can be just as important to us as salary, so don’t take these things lightly.

If you're not happy with your salary review, what next?

Note: This article was adapted from Robert Half Australia 

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