Set the right pay rates

Advantages of reviewing pay rates and systems


You should review your pay systems on an ongoing basis. It is also important to check, at least annually, that your pay rates are competitive.

Advantages of pay reviews

If you regularly review your pay systems, you can check whether or not you are achieving objectives such as cost control, team working and increased productivity.

Other benefits of regular reviews are that you can:

  • address the effect of factors such as regional changes, industry developments or skills shortages
  • incorporate the impact of new machinery or technology on your business, such as new skills requirements and new roles
  • review hiring and training policies - see advertising a job and interviewing candidates
  • prepare for changes required by legislation such as revisions to national minimum wage rates
  • review feedback from your workers on whether your pay rates and systems are fair and act as incentives
  • incorporate changes in employment contracts
  • act on decisions from collective bargaining - see how to work effectively with trade unions
  • ensure you keep in contact with people on a break, eg maternity or adoption leave
  • find and close any loopholes that might otherwise have led to claims of pay discrimination on the grounds of eg gender, race, status as a part-time worker


You may wish to consider reducing differences in pay structure between categories of employees.

This process - called harmonisation - can often be beneficial and be utilised throughout your business.

Where this is likely to result in a reduction in an employee's pay, you must seek agreement to the change in the first instance. You should also be aware though that harmonisation in a situation where there has been a TUPE transfer will almost certainly be unlawful.

See how to change an employee's terms of employment.

Consulting your workforce when reviewing pay

You may consider involving workers' representatives in your pay reviews. This encourages feedback and helps you to hear of any problems they are facing.

Alternatively you could set up a pay review committee, which may or may not include workers' representatives, that meets regularly to consider pay-related issues.