Letter informing employee of salary increase


Oct 26, 2022

This letter is used to amend or vary the terms of an existing employment contract that relates to pay / salary.

What is a letter informing employees of a salary increase?

This is a wage increase letter used to amend - or vary - the terms of an existing employment contract that relates to their pay or salary, whilst the remainder of the original agreement terms remain the same.

When should you use a letter informing employees of salary increases?

Whilst amendments or variations to employment contracts do not strictly need to be in writing for a pay compensation adjustment letter, we would strongly recommend that agreed changes be in writing to ensure clarity and transparency.

This is particularly important when there is a change in remuneration, notice period or post-termination obligations.

If the amendments or variations are substantial, or if the original employment contract was created prior to April 2020 (when there were significant changes to employment contract law), the employer should consider if a new employment contract should be entered into instead of this letter. 

Why is a letter informing the employee of a salary increase necessary?

Having a letter documenting the change in the employment contract is essential for a few reasons, with some of these being because:

1) Removes uncertainty of disputes

There is no uncertainty or dispute about what change to the terms has been agreed upon or when it is effective. 

Without such a raise letter in place, it is far more likely that there will be a dispute between the employer and employee either during the employment or after the employment ends about what the employer and employer agreed upon, i.e. what change in terms was approved, particularly where verbal discussions have taken place over a period of time. 

Consequently, it reduces confusion, avoids ambiguity or uncertainty and gives everyone clarity and peace of mind.

2) Ensures that the employer is adequately protected

Provided that all necessary parts of the employment contract are updated (in particular, taking into account April 2020 changes, which are seen further above and below), the employment contract will remain legally compliant and fit for purpose.

As a result, it encourages good relationships between both the employer and employee. It also shows the employee that their employer is serious about getting things right.

What are the common pitfalls of a letter informing employees of salary increases?

There are several problems that can arise, and these can consist of: 

Not documenting the variation in writing

As explained above, changes to an employment contract should be confirmed and agreed in writing to avoid misunderstandings or disputes about what was agreed upon.

Not updating the rest of the contract

As explained above, if the original employment contract was created before April 2020 (when there were substantial changes to employment contract law), the employer should enter into a new employment contract reflecting both the changes to the law in April 2020 and the agreed variations of the employment contract.

Losing the signed copy

Without a signed copy of the letter, there is no evidence of what the change in the agreed terms and conditions of the employment are. Signed contracts can quickly and easily be saved on the Pocketlaw platform so that they are securely stored.

What is the purpose of a salary increase letter?

To formally communicate to an employee that their salary has been increased, often as a result of a performance review, promotion, or annual increment.

How do you write a salary increase letter?

These should consist of an employee's name, new salary amount, the Effective date of the increase, the reason for the rise (if appropriate), and any changes in responsibilities or job title, to name a few areas.

Template for Pay Rise Letter

[Your Name]

[Your Position]

[Company Name]

[Company Address]

[City, Postal Code]

[Email Address]

[Phone Number]


[Employee's Name]

[Employee's Position]

[Employee's Address (Optional)]

[City, Postal Code (Optional)]

Dear [Employee's Name],

Subject: Salary Increase

I hope this letter finds you well. I am writing to acknowledge your exceptional performance and contributions to [Company Name / Department Name] over the past [time period]. Your dedication, skill, and hard work have not only significantly benefited our team but have also helped us achieve [specific accomplishments or goals].

After carefully reviewing your performance, I am pleased to inform you that your annual salary will be increased by [percentage or amount]. This adjustment will be effective from [effective Date], and will be reflected in your pay starting [Date of the next pay cycle].

Your new annual salary will be [new salary amount]. This increase is a testament to your hard work and the value you bring to our team. It's important to us that your compensation reflects the significant role you play in our organisation's success.

We appreciate your ongoing commitment and look forward to your continued contributions. We believe our team will reach even greater heights with your skills and dedication.

Please feel free to reach out to me or [HR Contact Person's Name] in Human Resources if you have any questions regarding your new salary or any other employment matters.

Thank you once again for your hard work and dedication.


[Your Name]

[Your Position]

How to personalise this template further

You could take this a step further, for instance, by:

1) Adding Specific Achievements

Highlight specific accomplishments of the employee that justify the pay rise.

2) Personal Touch

Add a personal note or appreciation specific to the employee's contribution.

Company Goals

Link their performance to broader company objectives or goals.

Just always remember, a pay rise letter should not only communicate the salary increase but also serve as a tool to motivate and provide recognition to your employees simultaneously.

Where is it best to Store Salary Increase letters?

Ideally, the letter should be stored securely and the agreement process automated to avoid the communication going astray, which could lead to issues. 

Bulk Letter Tracking Capability

When it is not just one person but a team getting a pay rise, Pocketlaw's platform can also easily handle multiple salary increase letters simultaneously. 

This allows you to select who will receive the letter and automate the process in one go. Then, with our e-signature technology, you can track who has accepted, when, and who has not with ease.

How can you efficiently manage the storage of salary increase letters?

One way is to print it out and hope it doesn't get lost; another way is to keep it in your emails and wish it does not get deleted. Alternatively, you can use the Pocketlaw platform to securely store your salary increase letters and use the platform for designates, which can then be logged and tracked.

Then, these letters can be easily shared with other team members when required and needed, and won't run the risk of getting lost.

You can also use our prebuilt salary increase templates to streamline the process even further.

As these are just one type of legal document that we can efficiently create for you, this enables you to easily create and adapt many templates and streamline your whole legal document process.

AI-Driven Letter Templates

If you want to take the hassle out of this process, our innovative AI technology offers you the ability to draft clauses, as well as to help you summarise the template prior to sending it. These added functions enable your HR teams to generate letters using organisation-approved terms and brand them correctly and rapidly while streamlining your entire process at the same time.

Seamless Data Integration

We can also integrate effortlessly with leading HR platforms. This integration ensures that you get the correct automatic data transferred into fields within the letter templates on the platform - thus eliminating the need for manual data entry, which can easily include incorrect information such as the name of your employee or address not spelt correctly, for instance.

Should the letter be printed or emailed?

This depends on your company policy. Some prefer a formal printed letter, while others may find an email more convenient and efficient. However, one area to remember is the secure document storage of the letter so it remains available down the line at all times.

How specific should I be about the reasons for the increase?

It's good to acknowledge the reasons for the increase, such as recognising the employee's contributions, but without going into excessive detail.

Is it necessary to mention the employee's current salary?

It’s not mandatory, but it can be helpful to provide context, especially if the increase is a percentage of the current salary.

Should the letter address future performance expectations?

It can be beneficial to link the salary increase to ongoing performance expectations and goals. This is something you need to consider as part of your company culture.

How formal should the language be?

The language should ideally be both professional and respectful, reflecting the formal nature of the communication.

Can the letter include information about future salary reviews?

Yes, and informing the employee about the next review period or any potential future salary adjustments is often helpful so they are aware.

Should the letter mention confidentiality?

Yes, always remind the employee that salary information is confidential and should not be discussed with others.

Can the letter be used to address other changes in employment terms?

If relevant to their salary, but it’s generally better to keep the focus on the salary increase and address other changes separately to avoid unnecessary complexities developing.

How should the letter be concluded?

On a positive note, they are expressing appreciation for the employee's hard work and looking forward to their continued contributions to the company's future.

Is it necessary to have the employee acknowledge receipt of the letter?

Yes, it is a good practice to have the employee sign a copy of the letter for your HR records, acknowledging that they have received and understood the information. This helps to avoid confusion down the line.

Should I provide a contact for further questions?

Yes, it can be a good course of action to include the name and contact information of a person who can answer any questions the employee might have to ask.

How can I ensure the tone of the letter is motivating?

Ideally, you want to use positive language and express appreciation and confidence in the employee’s abilities and contributions. Try to avoid any negative language if at all possible to do so.

What legal considerations should I keep in mind?

You want to ensure that the salary increase is in compliance with employment laws and internal company policies and avoid any language that could be interpreted as discriminatory or a promise of future employment.

Please note: Pocketlaw is not a substitute for an attorney or law firm. So, should you have any legal questions on the content of this page, please get in touch with a qualified legal professional.

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