Pay increase notification letter template
If a decision has been made to increase an employee's pay or salary, issue this model notification letter template to confirm the full details.
Pay increase notification letter
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[Company name]
[Sender address]
[date]
[Recipient name]
[Recipient address]
Dear [Recipient first name],
Notice of salary increase
[Further to our conversation ]I am [delighted | pleased] to [confirm | notify you of] an increase in your salary of £[amount] per [annum | month | week].
This increase is in respect of [insert details here... (e.g. promotion, change of role, cost of living, reward for performance / loyalty], and will take effect from [date].
[Two copies of your updated role profile are attached. Please read, sign and return one copy to me.]
Please acknowledge this change by signing one copy of this letter and returning it to me, and in the meantime, if there are questions or points needing further clarification, please do not hesitate to contact me.
[Thank you for all your hard work. I'm very pleased with your performance and commitment and [Company] appreciates your efforts and achievements so far. This increase is well-deserved and I look forward to continuing our excellent working relationship for many years to come.]
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Agreement
If you are in agreement with the above changes to your terms and conditions please sign both copies of this statement, retain one and return the other to HR.
| Signed (employee): | |
| Date: |
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Yours [faithfully | sincerely],
[Sender name]
[Sender job title]
[Sender telephone]
[Sender email]
[For, and on behalf of [Company name] ]
What is this for?
A pay / salary increase notification letter informs employees about a salary or wage increase, including the new rate and effective date.
Issuing this letter also maintains good communication and trust, and it will also ensure that should there be any disagreement, there is a clear paper trail.
Tip: Issuing the letter after meeting with the employee to tell them in person is great practice to maintain a positive working relationship, trust and ensure clear understanding of terms (i.e. any issues can be managed proactively).
Employment law compliance
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Employment Rights Act 1996: Ensures employees are provided with written confirmation of any changes to their terms and conditions, including pay increases.
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Equality Act 2010: Requires employers to ensure pay increases are applied fairly, without discrimination based on protected characteristics.
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National Minimum Wage Act 1998: Mandates that pay adjustments comply with updated minimum wage rates where applicable.
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Income Tax (Earnings and Pensions) Act 2003: Outlines employer responsibilities for correctly adjusting PAYE and National Insurance contributions following a pay increase.
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Best Practice: Communicate pay changes clearly and in writing, including the effective date, reasoning, and any changes to contractual terms.
In addition:
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Follow company policies: Ensure that the pay increase is consistent with company policies and procedures, including those related to performance reviews, promotions, and salary scales. If there is a collective bargaining agreement or employment contract in place, make sure that the pay increase complies with the terms of those agreements.
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Be clear and concise: The letter should be clear and concise, outlining the details of the pay increase, including the amount of the increase, the effective date, and any conditions or expectations that may be associated with the increase.
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Document the decision: Keep a record of the decision to provide a pay increase, including the reasons for the increase and any supporting documentation such as performance evaluations or salary surveys.
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Maintain confidentiality: Ensure that the pay increase notification is kept confidential and only shared with those who need to know, such as the employee's immediate supervisor and the human resources department.
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Avoid promises: Avoid making promises that the company may not be able to keep, such as promises of future pay increases or promotions. Be transparent and honest about the reasons for the pay increase and the company's expectations for the employee going forward.
Documentation sequence
Pay or salary payment arrangements policy
This model policy template provides information regarding pay or salary payment arrangements.
Decision-making milestones
| Step | Description | Responsibility | Timing (Days from Issue) |
| 1 | Performance Evaluation: Conduct a thorough performance evaluation of the employee to assess their contributions and achievements. | HR / Management | Day -21 to Day -14 |
| 2 | Budget Review: Review the company's financial status and budget to ensure that a pay or salary increase is feasible and justified. | Finance / Management | Day -14 to Day -7 |
| 3 | Determine Increase Amount: Based on the performance evaluation and budget review, determine the appropriate pay or salary increase amount for the employee. | HR / Management | Day -7 to Day -3 |
| 4 | Prepare Notification Letter: Create a comprehensive Pay or Salary Increase Notification Letter template. Include the employee's current and new salary, effective date, and a personalised message highlighting their contributions. | HR / Management | Day 0 |
| 5 | Issue the Notification Letter: Schedule a meeting with the employee to deliver the news in person and provide them with the Pay or Salary Increase Notification Letter, officially informing them of the pay or salary increase. | HR / Management | Day 1 - Day 3 |
This step-by-step process ensures that the pay or salary increase is well-justified, consistent with the company's budget, and delivered to the employee in a professional and transparent manner through the notification letter.
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Practical example
Scenario
ABC Limited conducts annual salary reviews to ensure fair compensation for its employees. As part of this process, HR Manager Sarah needs to notify eligible employees of their salary increases.
Initial Response
After reviewing employee performance and market data, Sarah identifies employees deserving of a salary increase.
Drafting the Letter
Sarah drafts a letter template outlining the salary increase details, including the new salary amount, effective date, and appreciation for the employee's contributions.
Content of the Letter
The letter expresses appreciation for the employee's hard work and dedication, explains the reason for the salary increase, and provides clear details about the new salary arrangement.
Sending the Letter
Once the letters are finalised, Sarah sends them to the respective employees via email or physical mail.
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