How are salary increases determined?

The South African Rewards Association (SARA) says it often receives questions related to salaries, benchmarking and benefits. Muhammed Goolab, executive committee member of SARA, answers the top five most frequently asked questions.


1. What does a market-related salary mean?

A market-related salary refers to the going rate that the job market is prepared to pay for a specific role. This is done through salary benchmarking which is an important tool that is used to understand pay levels across all the roles within an organisation.

Benchmarking involves a process where a company’s jobs are matched to roles with similar responsibilities and at similar levels outside of the business. Companies do this to identify the salary levels of various roles within the market.


2. How does my pay compare to other employees who work at my company and people in similar positions at other companies?

Many times, companies participate in salary surveys that are run by independent service providers. This information provides an accurate view of salary ranges across various industries.

Your Human Resources team may be able to share this information with you, which is typically presented in the form of a spread of salaries that indicate the lower and upper ends of the salary range for job roles. Companies typically also have internal pay scales with lower and upper limits for each pay grade.

Where you sit on the scale will depend on differentiating factors such as skill level, experience, performance, education and so forth.

If your company does not share pay-related information with staff, online resources such as job adverts can be researched. These sources, however, tend to be unreliable because the data has not been validated.


3. How are salary increases determined?

Some of the factors that employers consider to determine salary increases include affordability, business performance, union agreements, industry trends, as well as salary market movements.

It is for these reasons that salary increases aren’t always aligned to inflation and macro-economic trends, although both these factors are considered when determining increases.


4. How much could I earn when I reach my potential?

The rates of pay for various roles are determined by market demand. Organisations pay employees for the job they perform at the level they are at within the business. As an employee masters a role or discipline, they are often promoted to higher levels with increased responsibilities.

This is usually reflected in an increase in pay. As you master a role or discipline, you should find yourself in the upper end of the salary range for that job.


5. My friends and I do the same work, but they get paid much more than I do. Why is this the case?

While job roles may seem similar, several factors determine an individual’s pay level. Different industries, for example, pay at different levels for the same skill, while some companies pay premiums for skills that they place more value on, or are more difficult to fill.

This, combined with factors such as affordability and the differences in an individual’s performance, can all contribute to varying pay levels for similar roles.


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How are salary increases determined?