Alex is Sprintlaw’s co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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Giving a pay rise is a positive moment - it rewards great performance and helps you retain good people. But to make it official (and compliant), you’ll want a clear, professional salary increase letter that sets expectations and aligns with your legal obligations in Australia.
In this guide, we’ll walk through when to issue a pay increase letter, what to include, the legal points to consider under Fair Work and awards, and provide an employer-focused salary increase letter template you can adapt to your business.
By the end, you’ll know how to communicate pay rises confidently and keep your paperwork tight and compliant.
When Should You Issue A Salary Increase Letter?
There’s no single “right” time - it’s about what fits your workplace and industry. Common triggers include:
- Annual or scheduled reviews: Often tied to performance cycles, financial year, or anniversary dates.
- Award or minimum wage changes: To align with new legal minimums or classification changes.
- Promotions or role changes: When duties, responsibility or classification level increases.
- Market adjustments: To stay competitive with industry pay rates and retain talent.
- Incentive or competency milestones: Hitting sales targets, skill certifications or tenure milestones.
Even if the increase is straightforward, confirming the details in writing helps avoid confusion later and keeps your records consistent across the team.
What To Include In A Pay Increase Letter (And Why It Matters)
A good salary increase letter does three things: states the new remuneration clearly, explains when and why it applies, and ties any variable components to the correct rules.
Key elements to include:
- Employee and role details: Name, current position, and classification (if covered by an award).
- Effective date: The date the new pay rate starts (often the next pay period).
- New remuneration: Spell out the base salary or hourly rate and whether it’s inclusive or exclusive of super.
- Superannuation: Clarify super on base wages and any incentives that attract super. For variable pay, consider how ordinary time earnings and superannuation on bonuses apply.
- Award or agreement references: If relevant, note the award classification and confirm compliance with minimums.
- Reason for change: Short, factual context (e.g. annual review, promotion).
- Any conditions: For example, changes to commissions, allowances, or required approvals.
- Confirmation of unchanged terms: State that all other terms of the employment continue unchanged.
- Signature or acceptance: Ask the employee to sign and return, or confirm acceptance by reply email if that’s your process.
Being specific about whether a salary figure “includes super” or is “plus super” is especially important so there’s no misunderstanding about total remuneration.
Step-By-Step: How To Prepare And Send A Salary Review Letter
1) Check Legal Minimums And Internal Benchmarks
Confirm the employee’s current classification and ensure the new rate satisfies award or enterprise agreement requirements, including penalty rates and allowances where applicable. If you’re unsure, a quick health check on award compliance can save time later.
It’s also a good idea to sanity-check market rates and your budget. If you use the Fair Work Pay Calculator, make sure your inputs match the correct classification and hours - our walkthrough on how to use the Fair Work Pay Calculator explains the common pitfalls.
2) Decide The Structure: Base, Super, And Any Variable Pay
Confirm whether you’ll set a base salary plus super, or an “inclusive of super” package figure. If commissions or bonuses form part of the package, document how they’re calculated and whether they attract super. If you’re paying above the minimum, note the concept of above-award wages and how you will ensure award entitlements are still met overall.
3) Review The Employment Contract
Most businesses confirm pay rises with a letter and keep the existing Employment Contract in place. If you’re changing other terms (hours, duties, location), you may also need a formal contract variation. Here’s a practical guide on changing employment contracts and when consent is required.
4) Draft The Pay Increase Letter
Use the template below as a starting point. Keep it concise and clear. Avoid legal jargon - plain English is best.
5) Communicate And Keep Records
Give the letter in writing, ideally after or alongside a verbal discussion. If you need the employee’s acceptance, request a signed copy or written acknowledgement. Store it with their personnel records and update your payroll system to reflect the new rate from the effective date.
Salary Increase Letter Template (Employer)
Copy, paste and tailor this template to your business and the specific employee. Adjust headings and formatting as needed.
Subject: Salary Increase Hi , Following your , we’re pleased to confirm a salary increase effective from . New Remuneration: • Base salary: $ per , • Classification (if applicable): , • : • : Reason for Change: This change reflects /increased responsibilities]. Other Terms: All other terms and conditions of your employment remain the same as set out in your Employment Contract and our workplace policies. Please confirm your acceptance by by . Thank you for your continued contribution to . If you have any questions, feel free to reach out. Kind regards,
Tip: If you operate on a total package basis (inclusive of super), consider including a line that states the base and the superannuation component separately for clarity.
Legal Considerations In Australia: Awards, Super & Contract Changes
Awards And Minimum Pay
Many employees are covered by a modern award that sets minimum rates, penalty rates, allowances, breaks and classifications. Your pay increase letter should not leave the employee worse off overall. If you’re implementing an all‑inclusive rate, make sure it still satisfies award entitlements in practice - this is where an award compliance check is useful.
Salary Includes Super Or Plus Super?
Be explicit. If you state a “package” (inclusive), spell out the super component and the base. If you say “plus super,” confirm you’ll pay the statutory superannuation rate on top of the base. Where incentives are involved, check how ordinary time earnings (OTE) works and whether bonuses or commissions attract super - our guide on super on bonuses covers common scenarios.
Above-Award Wages And Set-Off Clauses
Paying above the award can be a practical way to simplify payroll, but you still need to ensure the employee is better off overall, taking into account penalties, overtime and allowances. If you use set‑off provisions, ensure the clause is well drafted and your actual payments cover entitlements. Start with the principles in above-award wages and seek tailored advice if you pay blended rates for varying rosters.
When Does A Pay Rise Trigger A Contract Variation?
If you’re only increasing pay and nothing else changes, a letter of confirmation is usually fine. If you’re changing duties, location, hours, classification or incentive plans, that’s a material change and you’ll generally want a written variation to the Employment Contract or a fresh contract. Here’s what to consider when changing employment contracts.
Performance Context And Process
When a pay rise follows a performance review, keep your internal process consistent and well documented. Clear criteria help with fairness and reduce the risk of disputes. If performance is variable or commission-based, make sure the incentive plan is documented and consistent with the contract.
Payroll Updates And Backpay
Update payroll from the effective date you’ve stated. If the increase is backdated (e.g., to the start of a review period), calculate and pay any backpay in the next pay cycle and note it on the payslip.
Common Questions From Employers
Do I Need The Employee To Sign The Pay Increase Letter?
It’s good practice. Asking for a signature or written acknowledgement confirms acceptance and avoids arguments about dates or inclusions later.
Should I Quote The New Rate As “Plus Super” Or “Inclusive Of Super”?
Either is fine - just be consistent and clear. Many employers prefer “plus super” for simplicity. If you package remuneration, break out the base and super in the letter to avoid confusion.
What If The Employee Is On Commission Or Bonuses?
Outline the fixed base clearly and attach or reference the incentive plan. Confirm whether bonuses or commissions count as OTE for super and how you calculate them. If you change the plan, consider whether it requires a contract variation.
Do I Have To Increase Penalty Rates Too?
If the employee is covered by an award and you’re paying a base rate only, award penalty rates and allowances continue to apply on top. If you pay a loaded or above‑award rate, ensure the total pay actually covers what would have been payable under the award across their roster.
How Do I Make Sure My New Rate Meets Minimums?
Confirm the correct award classification and check current rates. A quick cross‑check using the Fair Work Pay Calculator can help sanity‑check your numbers (and remember to include allowances and penalties where relevant).
Can I Tie The Increase To New Duties?
Yes - if duties are materially changing, reflect that in the letter and consider a contract variation. Clear documentation helps everyone understand expectations and supports a fair classification under the award.
Key Takeaways
- A salary increase letter should clearly state the new rate, the effective date, whether it’s plus or inclusive of super, and any award classification.
- Confirm award coverage and minimums before you commit; if you pay above-award or blended rates, ensure the employee is better off overall.
- If you’re changing more than pay (like duties, hours or incentives), consider a written variation to the Employment Contract.
- Be explicit about superannuation, OTE and whether bonuses or commissions attract super to avoid surprises at payroll time.
- Get your internal process consistent - communicate verbally, follow up in writing, collect acceptance and update payroll promptly.
- If you’re unsure, a quick check on award compliance or a chat with an employment lawyer can help you lock this down with confidence.
If you’d like a consultation on drafting or implementing a salary increase letter for your team, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
