Let’s be honest. For many business owners, EOFY salary reviews feel harder this year than they have in a long time. Employees are feeling the impact of rising living costs. Many have seen headlines about wage increases, inflation and labour shortages and naturally expect their pay to increase. At the same time, business owners are facing increased wage costs, rising superannuation, higher insurance premiums, increasing compliance obligations and tighter margins than they’ve seen in years.

It’s a difficult balancing act. Over the last few weeks, I’ve had a number of conversations with business owners who are asking the same question “How do I reward my people when the business simply can’t absorb large salary increases?” The answer isn’t always straightforward, but what I can tell you is this.

Doing nothing is rarely the right approach.

That doesn’t mean everyone gets a pay rise. It means having a deliberate strategy rather than avoiding the conversation altogether.

Start with the business reality

One of the biggest mistakes I see is business owners looking at salary reviews in isolation. Before you even start discussing individual employees, take a step back and ask yourself

  • How has the business performed this year?
  • What do the next 12 months look like?
  • What are our biggest risks?
  • Where are our labour costs currently sitting?
  • What can we realistically and sustainably afford?

There is no point committing to salary increases that look good in July but create financial pressure by November. A salary review should never be based on guilt; it should be based on what the business can genuinely sustain.

Not everyone should receive the same outcome

This is where things often become uncomfortable. Many businesses still approach remuneration reviews as though everyone should receive the same increase regardless of performance, contribution or value. I don’t believe that’s the right approach. Your highest performers should not be treated the same as employees who are simply meeting minimum expectations.

EOFY is an opportunity to ask some honest questions.

  • Who are my key people?
  • Who consistently goes above and beyond?
  • Who do I genuinely worry about losing?
  • Who has taken on additional responsibility?
  • Who has developed new skills?
  • Who is creating value for the business?

Those are the employees I would be focusing on first.

Before you increase salaries, check your compliance

This is the part that often gets missed. Many businesses are so focused on discussing salary increases that they overlook the compliance risks sitting underneath.

Questions worth asking include

  • Are employees correctly classified?
  • Are annualised salaries still passing BOOT requirements?
  • Have award increases been applied correctly?
  • Are contracts still fit for purpose?
  • Have working arrangements changed over time?

I’ve seen plenty of businesses increase salaries only to discover later that they had a much bigger compliance issue sitting underneath. A remuneration review is the perfect opportunity to sense-check everything.

Money isn’t the only lever

When budgets are tight, many business owners assume there is nothing they can offer. That’s simply not true. Some of the most valued things employees receive aren’t always financial. Think about

  • Additional flexibility
  • Professional development
  • Training opportunities
  • Leadership development
  • Career progression
  • Additional leave
  • Better systems and support
  • More autonomy

Of course, salary matters. But if you’re relying solely on money to retain people, you’re often missing the bigger picture.

The conversation matters just as much as the outcome

One thing I’ve learnt over the years is that employees are often more accepting of a decision when they understand the reasoning behind it. Where businesses get into trouble is when they avoid the conversation altogether or provide vague explanations.

If the business has had a difficult year, explain that. If you’ve prioritised certain roles because of market pressures, explain that. If someone hasn’t received an increase because they’re still developing in their role, explain that too. Most people don’t expect perfection. They do expect honesty.

My advice this EOFY

Don’t treat salary reviews as a tick-box exercise. Use this time to look at the bigger picture.

  • Remuneration
  • Compliance
  • Workforce planning
  • Retention
  • Future capability

The businesses that do this well tend to make better decisions because they’re not simply reacting to pressure or having difficult conversations one employee at a time. They’re making deliberate decisions that support both their people and the long-term sustainability of the business. And in the current economic climate, that’s more important than ever.

Need a second opinion?

If you’re working through EOFY salary reviews and aren’t sure whether your salaries remain competitive, compliant or sustainable, now is a good time to take a closer look.

We regularly help businesses with:

  • Remuneration reviews
  • Award and compliance reviews
  • BOOT assessments
  • Market benchmarking
  • Workforce planning
  • Salary structures and annualised salary reviews

Sometimes a quick sense-check is enough. Sometimes a deeper review uncovers risks or opportunities you weren’t aware of. Either way, it’s far easier to address these issues before decisions are made than after. If you’d like support with your EOFY remuneration review, we’d be happy to help. Get in touch with us today.

Find our articles helpful? Remember to follow us on Facebook, Instagram or LinkedIn to keep up to date with our practical tips and information for business owners and managers.