The difference between performance review and salary reviews

The fundamental difference between performance and salary reviews is that a performance review is all about development and career progression and a salary review is purely about remuneration.



It is a common belief that the two should always be kept separate and this is why?

  • Removing the salary review discussion from the performance review allows both parties to concentrate on personal and company development. Most people are nervous when discussing salaries. The situation can sometimes be awkward, and it is possible that the employee may have been building up for some time to ask the question. This nervousness does not always allow for the conversation to flow with regards to any personal development needed and may detract from the point in hand. Take away the nervousness of discussing money to allow for construction and positive performance review.
  • To allow a free-flowing development plan the ideal situation is that any updates whether it concerns to be addressed or praise to be given should not just be left to an annual or bi-annual review. Allowing for more regular performance reviews and the opportunity to feedback without having to address salary and or any bonus`s due should increase overall communication and in turn see an increase in productivity and engagement.
  • If the annual review includes salary reviews it will become the focus of the complete conversation and detract from any feedback that needs to be given, from both parties whether positive or negative.

Performance review should be used to promote and encourage development and growth, however, there are many companies that tie bonus payment with performance.   The majority of bonus payments are measured on individual or company performance or a combination of both.  If this is the case, the bonus structure should be set in black and white and the measurables should be communicated clearly. When the time to award the review arrives there really should be no need for a discussion, it is a given or not as the case may be.

It is now a common belief that the way to drive high performance is through honest feedback that employees and managers really hear. Clouding the focus with a conversation on pay and bonus is not conducive, nothing would be heard other than if their performance has been enough to deserve a pay rise or receive that annual bonus.

Keep the two separate and concentrate on using the performance review to focus on success and work through areas for development.

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