Salary Reviews versus Performance Reviews

In the HVAC, plumbing, and electrical industries, employee performance reviews have traditionally been tied directly to salary increases. The common approach is simple: conduct an annual performance review and immediately follow it with a raise. While this seems straightforward, it often creates unrealistic expectations and can lead to employee dissatisfaction when financial realities don’t align with performance scores.

The Problem with Linking Reviews and Raises

When employees automatically associate a positive performance review with an immediate pay increase, it sets up a cycle of disappointment if the company’s budget cannot support significant raises. Salary adjustments are influenced by many factors—company profitability, market conditions, and financial projections—not just individual performance. By tying reviews directly to raises, you risk demotivating high-performing employees when the raise doesn’t meet their expectations.

A Better Approach: Separate the Two

Instead of combining performance and salary reviews, consider conducting quarterly or semi-annual performance reviews focused solely on feedback, growth, and goal-setting.

These reviews should:

• Provide constructive feedback and recognize achievements.
• Identify training needs and career development opportunities.
• Align employee goals with company objectives.

Salary reviews, on the other hand, can occur later—perhaps on January 1st or the employee’s anniversary date—and should be based on a combination of performance data, company financial health, and market benchmarks. This approach ensures raises are fair and sustainable without creating false expectations.

Why This Works

Separating reviews from raises:

• Encourages employees to focus on development rather than just compensation.
• Gives managers flexibility to reward performance when budgets allow.
• Reduces the risk of demotivation caused by financial constraints.

Performance reviews still influence salary adjustments, but they are not the sole driver. This distinction helps maintain transparency and trust while protecting your company’s financial stability.

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