A salary increase letter is a formal document written by an employer to their employee informing them of a raise in their compensation.
The letter usually outlines the reasons behind the salary raise and lists all the changes that have been made, including but not limited to: wage increases, extra expenses, bonuses, etc. The letter also helps in alleviating any misunderstandings that may arise in the future regarding the employee’s compensation.
Manager’s Role in Communicating the Salary Increase
The manager or employer is typically in charge of informing the employee of changes to the compensation. While communicating the increase, it is important that the manager discuss the specific reasons why a remuneration increase was granted to the employee. While writing the document, it is important to focus on specific performance contributions and achievements made by the employee that are linked to the increase in remuneration. The manager should also mention the exact amount of the increase, future plans, and expectations from the employer.
The employer or the manager usually writes this letter after meeting and discussing key issues with the employee. The purpose of the letter is to attest that the employee’s complaints and issues have been addressed and that their pay has been modified as a result. The document also acknowledges the employee’s efforts, performance, and dedication to the company.
When is the Right Time for a Salary Increase Letter?
All companies have different policies regarding when their employees should receive salary increases. While some companies give their employees a salary increase on a year-end basis, most companies give their employees a salary increase based on their performance. As an employer, it is important to have a strategy for giving out a salary increase.
For instance, you may consider giving the salary increase if or when:
- You want the employee to take on additional responsibilities.
- The employee has demonstrated strong/commendable leadership skills
- The employee has significantly increased the company’s revenue
- The employee has completed their probation period
- The employee has been promoted to another department or position
- If the employee has requested a raise
- The employee has acquired new certifications or skills
- If the cost of living has significantly increased
- To be at par with the employee’s market value
To formally notify the employee of your decision to grant an increase, it is important that you draft a formal letter. It should be sent to the employee via email or postal mail and should be concise and clear. The letter should be specific, mentioning all the changes that have been made to the employee’s compensation, including but not limited to:
- The new base salary
- The reason for the increase in pay
- A clear outline of all benefits (if any) that the employee will be receiving from the increase
Contents of a Salary Increase Letter
Having a meeting with your employee and discussing your decision about raising compensation is the best way to inform the employee of your decision. The meeting will also help you better understand the employee’s performance, growth, and expectations.
During your meeting with the employee, you can effectively communicate your decision as follows:
Understand the employee’s concerns
Take a proper minute to understand the employee’s concerns and issues regarding the increase in salary. Ensure that you are clear with their expectations regarding benefits, and increases in their responsibilities as a result of the raise.
Explain why they are getting a pay raise
Explain your reasons for granting a pay increase to them. Make sure you directly connect the salary increase to their performance, skills, and growth areas. Also, highlight the benefits they will be receiving from the salary increase.
Highlight their key contributions
Highlight their key contributions and accomplishments in relation to your decision to grant a pay raise. Make sure you mention specific and detailed information about their performance, growth, and achievements. This will help you effectively communicate the information about their pay raise.
Discuss the raised dollar amount
Ensure that you clearly and specifically discuss the dollar amount of the raise. Detailing the exact amount of the raise will help avoid future misunderstandings or confusion about changes in remuneration.
Thank the employee for their contribution
Thank the employee for their hard work and efforts, and make sure you mention how much you value their hard work, performance, and commitment to the company. This will help to dispel any remaining doubts or concerns that the employee may have. Thanking them will also make them feel valued and appreciated by the company.
Confirm with the human resources department
To confirm that their benefits have been accurately updated and payment has been processed, check with the HR department. The HR department can also tell you if the raise amount is correct.
Drafting the Salary Increase Letter
After meeting with the employee to discuss and communicate your decision on granting the raise, you can draft and write the actual letter to communicate it officially. To do this effectively, consider following the steps below:
Step 1: Know what to include in the letter
Like any other formal letter, a salary increase letter from an employer should have at least four (4) basic parts. They are:
- The salutation
- The body of the letter
- Closing paragraph
It is important to note that the letter should be written in a formal tone and should be clear, direct, concise, and specific to the employee. Although the tone of the letter might vary depending on how close you are to the employee and how professional they are, the general tone should be respectful, professional, and courteous.
Step 2: Create an outline for the letter
The outline will assist you in structuring your letter and ensuring that your message is well communicated. Since this is a formal document, having a clear outline will help you determine what to include, where to include it, and how to present the information.
Step 3: Address the letter to the employee
There are key items that must be included by the employer in the header section of the salary increase letter. They include:
- The company name and address
- The employee’s full name
- The employee’s position title
- The employee’s department or division (if applicable)
- Date (of the letter)
- Your name and position title
- Your signature
It is important to make sure that these key items are present in the letter so that you can effectively communicate with the employee about the pay raise.
Step 4: Write a brief introduction
In general, the introduction of a letter should be concise. It is not necessary to provide a lengthy introduction, but it should provide enough information and context for the employee to understand that they are receiving a pay raise. Start with an informal greeting such as “Dear Mr./Ms. (employee name)” and then proceed with a brief outline of why they are getting a raise.
Step 5: Write the body of the letter
The body of the letter should explain why the employee is getting a raise and include specifics about their performance and meeting expectations. Mentioning specific reasons for it will help you communicate your message effectively. This can be done by highlighting key points related to their performance, growth, contributions, and achievements.
For instance, if the employee obtained a new certification or achieved a new skill, it is important to highlight this specific information and how it benefits the company. The body of the letter should also include a brief overview of their responsibilities, duties, and tasks. The exact amount of the raise should be clearly mentioned in this section.
Step 6: Finish the letter with a brief conclusion
The final part of the letter should be a brief conclusion. This is a direct conclusion that clearly and concisely states why the employee is receiving a raise and how their performance has positively impacted the company. This part of the letter should also be courteous and respectful, as it explains to the employee how much they are valued and appreciated by your company.
Include a professional closing signature such as “Sincerely,” “Yours Faithfully,” “Best Regards,” etc., and then your typed name and contact information immediately below.
Sample Salary Increase Letter from Employer
I am delighted to inform you that your performance review period has been completed, and I am happy to announce that your salary increase has been granted. You have exceeded our general expectations and have shown great commitment to the company’s growth and expansion.
Therefore, your salary will be increased immediately from $4000.00 per month to $5200.00 per month. Please be reminded that your new salary increase is also inclusive of the 5% performance bonus.
I am looking forward to a long and mutually beneficial relationship with you, and I hope that this increase will motivate you to work even harder. Please feel free to contact me if there is anything I can do for you in the future.
With Best Regards,
Best Practices to Follow
There are various best practices that you should follow when writing a pay raise letter to an employee. They include:
It is important to ensure that such letters are concise and effective to be able to directly communicate to your employee why they are getting a raise.
Keep a professional tone
While it is important to treat your employee with respect when speaking with them, avoid being overly polite, as this may be considered inappropriate. Remember that pay raise letters are formal and should therefore be written in a formal tone.
Proofread and revise
After you have completed the letter, make sure to proofread it before submitting it to the employee. This will ensure that there are no spelling errors, formatting errors, or other such errors that might have been overlooked. Since these letters are formal writings, proofreading is important and should not be disregarded.
As an employer, it is important to periodically improve, evaluate, and increase your employees’ salaries to ensure that they are receiving the maximum value and benefits they deserve. Letters informing employees of increases in their salaries provide a clear overview of your actions as an employer and clearly explain why the employee is getting the pay raise. A well-drafted letter should highlight the employee’s contributions and key achievements that warrant their salary increment. It should also be clear and concise and have a clear aim and objective in the context of employee performance and growth. You can also utilize our templates, which will provide you with a basic layout from which you can draft your own customized letters for your employees to inform them of an increment in their salaries.