Communicating pay rises in Australia
Reviewed by Mellow Editorial Team, HR & payroll content team
Pay rises land better when the communication is as well-prepared as the number itself. A poorly handled conversation — even when the increase is generous — can leave employees feeling uncertain, undervalued, or mistrustful of the process.
Be clear about what is changing and when
Start with the facts: the new rate, the effective date, and how it will appear in the first updated pay run. Employees should not have to guess whether the change has been processed. If the rise lifts a salary from one pay period mid-cycle, explain how the adjustment will be calculated and paid.
Also confirm what is not changing. If super contributions stay at 12% of ordinary time earnings, say so. If annual leave accrual or other entitlements are unaffected, a quick sentence removes ambiguity. People often assume a salary restructure touches more than it does.
Explain the reasoning, briefly and honestly
You do not need a lengthy justification, but some context builds trust. The most common grounds for a pay rise fall into a few clear categories:
- Performance-based — the employee has delivered measurably beyond expectations.
- Market alignment — benchmarking shows their rate has fallen behind comparable roles.
- Tenure or progression — a scheduled step-up tied to time in role or a promotion.
- Award or agreement increase — a Modern Award or enterprise agreement mandates the change.
- Cost-of-living adjustment — a broader decision to move rates in line with inflation.
One or two honest sentences about which of these applies is enough. Employees can tell when the explanation is vague to avoid committing to a rationale, and vagueness breeds suspicion. If the increase is partly driven by retention risk, you can acknowledge that without making it sound transactional.
Choose the right format for the conversation
For most employees, a pay rise should be communicated in person (or via video call for remote staff) before any written confirmation follows. The verbal conversation gives the employee a chance to ask questions and signals that the decision was deliberate, not just an automated payroll update.
The written confirmation — an email or letter — should follow promptly and include:
- the new annual salary or hourly rate
- the effective date
- how it will appear in payroll (e.g., reflected from the next full pay period, or with a back-dated adjustment)
- any change to the employee's contract, if the role itself has changed
If the rise flows from a Modern Award rate increase, written notice is still good practice even if not always strictly required. Employees covered by awards may not be tracking the Fair Work Commission's annual review cycle, so proactive communication prevents confusion when they see a different number on their payslip.
Handle the payroll mechanics correctly
A pay rise is not just a conversation — it has to flow through your payroll system accurately. Key steps:
Update the employee record before the next pay run. A rate that sits in an email draft but not in your payroll software will result in underpayment, which creates a compliance problem and erodes trust immediately.
Check PAYG withholding. A salary increase moves the employee's annualised income, which changes the withholding amount under the progressive income tax schedule. Your payroll software should recalculate this automatically, but verify it — particularly for employees who are close to a bracket boundary or who have a HECS/HELP debt, where repayment rates also shift by income band.
Report via Single Touch Payroll. Every pay event must be reported to the ATO through STP. There is no separate lodgement required for a pay rise specifically — the updated figures are captured in the regular STP submission for that pay period. Ensure your year-end STP finalisation (due by 14 July) reflects the updated rate for the full period it applied.
Super contributions. At 12% of ordinary time earnings, the employee's super contribution amount will increase proportionally. Check that your fund or clearing house receives the revised figures, and that contributions are paid within the required timeframe.
What to do when the answer is not yet "yes"
Sometimes an employee raises the topic before you are ready to make a decision. Handle this honestly rather than deferring indefinitely. Set a specific review date, describe what you will assess, and follow through. An employee who hears "I'll look into it" and then receives no update in three months is more disengaged than one who received a clear "not yet, here's why, here's when."
If budget constraints mean an increase is not possible right now, say that plainly. Employees generally respect honesty about business conditions. What they do not respond well to is the sense that the process is arbitrary or that the question will simply be avoided until they stop asking.
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