How to Conduct an Effective Salary Review Process for Large Businesses

A salary review process shapes how employees perceive fairness, influence retention, and ensure compliance with legal and ethical standards. For large organisations, the stakes are even higher because pay decisions affect thousands of people and can have a direct impact on reputation and performance.

Key reasons salary reviews matter:

• Retention and motivation: Competitive and transparent pay structures help retain top talent and keep teams engaged. In a tight labour market, pay remains one of the strongest predictors of employee loyalty.
• Compliance and risk management: Organisations must meet obligations such as gender pay gap reporting and equal pay legislation. Failure to do so can lead to legal penalties and reputational damage.
• Business alignment: Salary frameworks should reflect organisational goals and market conditions, ensuring that pay decisions support growth and competitiveness rather than creating internal inequities.
• Building trust and engagement: Transparent pay decisions help employees feel valued and reduce uncertainty.
• Driving diversity and inclusion: Regular reviews are essential for identifying and addressing pay gaps, supporting equality commitments.
• Informing strategy: Pay data offers a clear view of market competitiveness and helps align reward structures with business objectives.

Emma Parkin, Head of Propositions at The Access Group, highlights this erosion of trust in salary review processes:

“Only 32% of employees believe their pay is fair, yet research shows that pay process fairness is 5.4 times more impactful on employee satisfaction than the actual compensation amount.”

Poorly managed reviews, on the other hand, can have serious consequences. They often lead to disengagement, higher turnover, and even reputational harm. Disengaged employees alone cost UK businesses billions each year. To understand the scale of this risk and why engagement should be a priority, explore our blog on the risks of disengaged employees.

Most large organisations carry out annual salary reviews, while some choose biannual adjustments to remain competitive in fast-changing markets. The right frequency depends on several factors:

• Market trends and inflation: Rising costs and shifting benchmarks can make annual reviews insufficient during periods of economic volatility.
• Regulatory requirements: Gender pay gap reporting is mandatory for UK businesses with 250 or more employees. The latest Office for National Statistics data (April 2025) shows a 6.9% gap among full-time employees and 12.8% across all employees, underlining the importance of regular reviews to address disparities and maintain compliance.
• Internal equity: Monitoring pay across departments and regions helps prevent inconsistencies that undermine trust and engagement.

A flexible approach allows organisations to respond to talent shortages and economic changes without placing unnecessary strain on budgets. For some, this means supplementing annual reviews with targeted mid-year adjustments for critical roles.

Summary of key steps in the salary review process flowchart:

1.    Gather accurate data
2.    Assess internal equity and compliance
3.    Decide on salary adjustment approach
4.    Communicate transparently

1. Gather Accurate Data

Salary reviews without reliable data leave organisations exposed to risk. HR leaders need to show the board that pay decisions are based on evidence, not guesswork. Start by collecting at least three years of historical pay data to spot trends in progression and turnover. Combine this with external benchmarks from trusted sources such as CIPD or gov.uk to ensure your pay structures remain competitive.

Using an integrated HR software with built-in analytics can turn this from a manual, error-prone task into a strategic advantage. Instead of spending weeks on spreadsheets, you gain real-time insights into pay equity, budget impact, and predictive trends.

Why it matters: Accurate data builds trust. When the CFO asks, “Why are we increasing payroll by 4%?”, you’ll have the evidence to justify the decision.
 
“Companies with 10,000 employees can spend £35 million annually just on review processes – a significant investment in administration rather than strategic value.”

Emma Parkin, Head of Propositions at The Access Group

Best practice tips:

• Pull at least three years of historical pay data.
• Compare against external benchmarks (CIPD, gov.uk).
• Use analytics to identify patterns in pay progression and turnover.
• Model scenarios such as “What happens if inflation rises by 2%?” or “What if we increase high-performer pay by 5%?”

2. Assess Internal Equity and Compliance

Annual salary reviews are an ideal opportunity to check gender pay gap data and confirm compliance with equal pay obligations. Addressing these issues early helps organisations avoid reputational and legal risks.

Beyond compliance, technology is changing how organisations identify and resolve pay disparities. Advanced analytics and AI can uncover hidden discrepancies that traditional methods often miss. As Oli Quayle, AI Evangelist at The Access Group, explains in Episode 8: Performance and Progression of our Do the Best Work of Your Life series:

“Unknown pay discrepancies exist. AI can de-personalise and display bandings for roles, helping you level the playing field and move toward an equitable future.”

Checklist for compliance:

• Gender pay gap reporting (mandatory for UK businesses with 250+ employees).
• Equal pay for equal work.
• Audit historical discrepancies and document corrective actions.
• Build an action plan for closing gaps over time.

3. Decide on Salary Adjustment Approach

The way you structure pay adjustments sends a clear signal about fairness and organisational priorities. Options vary, and each approach has different implications for consistency, competitiveness, and motivation. For example, will you use salary bands to maintain internal equity, market-based brackets to stay competitive, or performance-based increases to reward impact? There is no universal model, but whichever you choose, it should align with your wider reward strategy.

Salary reviews work better in conjunction with recognition programmes as they can amplify the impact of pay decisions by showing appreciation beyond base salary. Our article can help you discover practical ways to build a culture of recognition.

Options to consider:

• Salary bands: Provide structure and fairness.
• Market-based brackets: Align pay with external benchmarks.
• Performance-based adjustments: Reward contribution and impact.
• Hybrid models: Combine approaches for flexibility.

Forward-thinking HR leaders are moving beyond annual reviews to continuous performance and reward strategies. Traditional salary reviews often feel like a tick-box exercise, but modern approaches create a culture of fairness and engagement that drives retention. Our webinar on moving beyond annual reviews explains more

4. Communicate Transparently

Even fair and well-structured pay decisions can fail if they are poorly communicated. Employees want clarity not only about what has changed, but why. Transparent communication builds trust and reduces the risk of disengagement. Poor communication is consistently cited as one of the leading causes of attrition.

Equip managers with clear talking points and FAQs so they can confidently explain decisions. Use multiple channels such as email, intranet updates, and one-to-one meetings to ensure consistency. Timing matters too: announcing changes too late can feel disrespectful and disrupt employees’ financial planning.

Best practice tips:

• Explain the rationale behind pay decisions.
• Provide managers with talking points and FAQs.
• Communicate through multiple channels (email, intranet, 1:1 meetings).
• Follow up with Q&A sessions to address concerns.

Inaccurate Data

Decisions based on incomplete or outdated data can lead to overspending, inequity, and board-level scrutiny. HRDs need confidence that pay adjustments are evidence-based.

How to avoid it:

• Use integrated analytics tools to pull real-time data rather than manual spreadsheets.
• Validate historical trends and model scenarios (e.g., inflation impact).

Ignoring Compliance

Non-compliance with gender pay gap reporting or equal pay laws can result in fines, reputational damage, and employee distrust.

How to avoid it:

• Audit pay structures annually and document corrective actions.
• Use HR software to track compliance and generate audit-ready reports.

Poor Communication

Even fair pay decisions can backfire if employees don’t understand the rationale. Lack of transparency drives disengagement and attrition.

How to avoid it:

• Communicate early and clearly using multiple channels (email, intranet, manager briefings).
• Provide managers with FAQs and talking points.

Managing salary reviews manually can be time-consuming and prone to errors. The right technology transforms this process into a strategic advantage. Access Compensation Management Software is designed to help HR teams streamline pay planning and make data-driven decisions with confidence.

What our solution delivers:

• Automated reporting and compliance tracking: Stay on top of gender pay gap reporting and equal pay obligations without manual effort.
• Advanced analytics: Gain real-time insights into pay equity, budget impact, and predictive trends to support smarter decisions.
• Significant time savings: Automated workflows can cut process time by up to 75%, freeing HR teams from spreadsheets and reducing administrative complexity.

Salary reviews form part of a wider employee experience strategy that influences retention and morale. Pay decisions work best when combined with recognition programmes, flexible benefits, and transparent communication. These elements show employees that value goes beyond base salary and help create a culture where people feel appreciated.

For practical ideas on building a culture of appreciation, read our guide to recognition programmes.

Salary reviews influence retention, compliance, and employee trust. Throughout this guide, we’ve explored why reviews matter, how to structure pay adjustments, and the role of technology in making the process fair, efficient, and strategic. From gathering accurate data to linking pay decisions with engagement initiatives, the message is clear: a well-managed review process drives business performance, not just compliance.

Now it’s time to put these insights into action. Salary reviews are too important to leave to manual spreadsheets and fragmented systems. With PeopleXD Evo Pay Planner, you can simplify pay planning, ensure compliance, and make data-driven decisions that support fairness and retention.