Letter to an Employee Informing of an Increase in Pay

So, you have some high-performing employees and you want to give them a raise?  Or, it’s that time of the year, and increases are given across the board? Importantly,  this salary increase letter can be used for any employee who is receiving that extra increment for the next pay period.

Why Do I Need a Formal Letter for a Salary Increase

Essentially, letters from employers serve two purposes. Firstly, is that it is the formal documentation of an action to be taken. In this case, the letter discusses the increase in pay. Also, it provides material as to why the increase is being given. More importantly, a formal letter provides significant motivation for an employee to perform better (if they have been lagging). Or, to continue the great work they’ve been doing.

Effectively, managers should ensure that they have had constant communication updates during the year. Importantly, this is so that the pay increase does not become a surprise. Especially if the increase might be thought of as too small.  Subsequently, by the time this letter is used, the employee should be aware of any issues already.

The Employee Pay Increase Letter Can Help Boost Morale

Additionally, if an employee has gone through a rough year, either personally or professionally, but continues to show an ability to shine, this letter will further boost morale. Typically, a formal letter, personally given to a star employee, can help get them working harder.  Who wouldn’t want something in their inbox which personally addresses their accomplishments over the year?

The Employee Pay Increase Letter Can Help Manage Improvement

Generally, for employees who are lagging, the salary increase letter will manage expectations. Ideally, employers will communicate performance issues earlier. However, this formal letter can be used to confirm that the expectations are, or are not being met.

Factors that impact salary increase

The employee’s client book: the clients, their size as well as their value can greatly affect how salary increase. When a company lands a big client they are most likely to increase salary to keep employees motivated. 

Competing company’s pay scales: there is a general market rate for most positions. Depending on how skilled an employee is and what value they bring to the company, their pay scales get affected.

Employee performance: one of the main factors that affect the increase in salary is definitely how an employee performs. A better-performing employee will most likely be incentivized to stay with the company by offering them a raise.

Longevity with the company: when employees have stayed with a company for a certain amount of time, they are seen as loyal to the company and this can affect how salary is increased. 

Company revenue and growth: If a company has been on standstill and hasn’t really scaled up, the salary increase of the employees will be affected as the company usually doesn’t have much to give. 

Conclusion

Firstly, employee pay increase letters are essential documents to ensure transparency and clarity for employees. Secondly, in balance with a formal performance management plan, this formal letter can address both star employees and employees who need an extra push.

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Along with this document, make sure you see these other templates in our library:

• Shareholder Agreement
• Option Agreement
• Employee Option Repurchase Agreement
• Share Appreciation Rights Plan
• Share Option Plan

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