Salary Increase Letter to an Employee: Template for Australian Employers

Giving a pay rise is one of the most positive conversations you can have as an employer. It’s a chance to recognise performance, retain great people, and build a culture where effort is rewarded.

But once you’ve had the conversation, you still need to formalise it properly. A clear salary increase letter to an employee helps you confirm the new pay details, reduce misunderstandings, and keep your records consistent (particularly important if you ever face a payroll dispute or Fair Work query).

In this guide, we’ll walk you through what to include, common traps to avoid, and provide a practical salary increase letter template for Australian employers.

Disclaimer: This article is general information only and doesn’t constitute legal, tax or accounting advice. Pay, superannuation and salary packaging/sacrifice arrangements can be complex and may depend on your employee’s award, enterprise agreement, contract and individual circumstances. Consider getting tailored advice before making changes.

What Is A Salary Increase Letter To Employee (And Why Does It Matter)?

A salary increase letter to employee is a written confirmation that an employee’s remuneration is changing. In practice, it’s usually issued after a salary review meeting or performance cycle, or when you promote someone into a new role.

Even if your employee is thrilled and says “no worries” verbally, writing it down matters because it:

• Sets clear expectations about the new rate of pay, the start date, and any other changes.
• Creates an audit trail for payroll and HR records.
• Reduces risk of future disputes about what was agreed (or when it was supposed to start).
• Supports compliance with minimum employment standards and your obligations under awards, enterprise agreements, and the Fair Work Act.

In many businesses, the letter is also used as a short “variation letter” to the existing employment contract. If you’re also updating other terms (for example, duties, title, or hours), you may need a more formal contract variation or an updated Employment Contract.

What To Check Before You Put A Pay Rise In Writing

Before you issue the letter, it’s worth doing a quick internal compliance check. This doesn’t need to be complicated, but it can save you painful back-and-forth later.

1. Confirm The Employee’s Coverage (Award, Enterprise Agreement, Or Contract)

In Australia, many employees are covered by a modern award, which can set minimum pay rates, classifications, allowances, overtime and penalty rates.

Even if you pay “above award”, you still need to ensure:

• the new salary won’t drop below minimum rates (including any relevant allowances), and
• your overall payment approach still meets your obligations (particularly if you use annualised salaries or set-off arrangements).

If you’re unsure which award applies or how to manage classification changes, it’s often best to get advice early rather than trying to reverse payroll decisions later.

2. Decide Whether This Is A Salary Increase, Promotion, Or Role Change

A pay rise can be simple (same role, higher pay), or it can come with a change in duties, title, reporting lines, or hours.

If the role is changing, you should consider whether you also need to:

• update the position description,
• issue a contract variation letter (or updated contract), and/or
• review internal policies and delegations (for example, sign-off authority).

Role changes can also intersect with other employment issues, so keep things consistent across what you say in the letter, what payroll implements, and what the employee actually does day-to-day.

3. Check Superannuation Treatment

For most employees, superannuation is payable on ordinary time earnings. If your “salary package” includes super, be very clear in your letter about whether the stated amount is:

• inclusive of super (a total package), or
• exclusive of super (super is paid on top).

This is one of the most common points of confusion we see in employment paperwork, and it’s very avoidable with clear drafting.

4. Consider Flow-On Effects (Bonuses, Allowances, And Payroll Settings)

Make sure you’ve considered what needs updating internally so the change is actually implemented correctly, such as:

• payroll system settings and pay codes
• overtime rates (if applicable)
• leave loading calculations (where relevant)
• salary sacrifice arrangements (if any)
• bonus eligibility (if your business has incentives or commissions)

If you provide salary increases as part of a broader remuneration strategy, it can also help to ensure your payroll processes align with how you calculate entitlements and other pay outcomes across the employment lifecycle.

What To Include In A Salary Review Letter Template

A good salary review letter template is short, clear, and practical. It doesn’t need to read like a legal contract, but it should be specific enough that there’s no confusion about what’s changing.

As a minimum, we recommend including:

• Employee details: full name, role title, and (optionally) employee ID.
• Date of letter: so there’s a clear record of when you issued it.
• Confirmation of the increase: the new base rate and what it replaces.
• Effective date: when the new salary starts.
• Pay frequency: weekly/fortnightly/monthly (and ideally the equivalent annual figure, or vice versa).
• Superannuation statement: inclusive or exclusive of super, plus a brief reference that super will be paid in accordance with law.
• Other terms unchanged: a simple line that all other terms of employment remain the same.
• Acceptance: a signature block for the employee (and employer), or confirmation that acceptance can be provided by signing and returning.

If you’re changing more than pay (for example, a new title and responsibilities), spell those out clearly. If you’re also updating contractual terms, consider issuing a contract variation letter or updated contract so everything stays consistent with your Employment Contract documentation.

Salary Increase Letter To Employee Template (Australia)

Below is a practical template you can adapt. Keep in mind that your exact wording may change depending on whether the employee is award-covered, on a total remuneration package, or being promoted. If you use award-based annualised salary arrangements or set-off clauses, it’s especially important to make sure the increase and the way you pay it remains compliant.

Note: Replace the brackets with your details and remove any sections that don’t apply.

Template: Salary Increase Letter

[Your Business Name]
[Business Address]
[Date]

Private & Confidential

[Employee Full Name]
[Employee Address]

Dear [Employee First Name],

Re: Salary Increase

We are pleased to confirm that following your recent salary review, your base salary will increase from $[current amount] to $[new amount] per [year / annum].

This salary increase will take effect from [effective date] and will be paid in accordance with our usual payroll cycle on a [weekly / fortnightly / monthly] basis.

Superannuation
Your base salary of $[new amount] is [exclusive / inclusive] of superannuation. Superannuation contributions will be made in accordance with applicable superannuation laws.

Other Terms
All other terms and conditions of your employment remain unchanged.

Please sign and return a copy of this letter to confirm your acceptance of the salary increase.

Thank you for your continued contribution to the business. We look forward to supporting you in your role and continued development.

Yours sincerely,
[Name]
[Position Title]
[Your Business Name]

Acknowledgement And Acceptance

I, [Employee Full Name], confirm that I accept the salary increase outlined in this letter, effective from [effective date].

Signature: ______________________    Date: ______________________

Optional Add-On (If The Pay Rise Is Linked To A Promotion)

If the employee is moving into a new role, you can include a short paragraph like:

Position Title
With effect from [effective date], your position title will change to [new title]. Your reporting line will be to [manager title/name]. Your key responsibilities will be updated in your position description.

If the promotion also involves substantial changes to duties or expectations, it may be cleaner to issue a new contract or a more detailed variation document (especially if you’re also updating restraint clauses, bonus structures, or commission arrangements).

Common Mistakes Employers Make (And How To Avoid Them)

A salary increase letter to an employee is simple, but the details matter. Here are some common pitfalls we see in small businesses, and how you can avoid them.

1. Forgetting To Specify The Effective Date

If the letter doesn’t state when the increase starts, you can end up with confusion about whether it applies from:

• the date of the meeting
• the date of the letter
• the next pay period
• a future date (for example, after probation or after KPIs are met)

Be explicit. If it starts from the next pay run, say that. If it starts from a particular date, include that date clearly.

2. Being Vague About “Package” Versus “Base Salary”

“$90,000 package” can mean different things to different people. If you use the word “package”, be crystal clear whether super is included.

If you want to keep it simple, many employers state:

• Base salary (exclusive of super), and
• a separate line confirming super will be paid on top in accordance with law.

3. Accidentally Changing Other Terms

Sometimes employers include casual comments in letters like “this replaces your previous agreement” or “all prior arrangements are cancelled”. That can create unintended legal outcomes, particularly if your business has carefully drafted employment documentation.

A safer approach is to state that all other terms remain the same, unless you’re deliberately changing them.

4. Not Checking Award Compliance Or Classification Changes

Promotions and salary reviews sometimes involve a shift in seniority. If your employee is award-covered, the new duties could push them into a different classification level.

That can affect minimum rates and entitlements (including allowances and penalty rates). It’s worth checking this before you confirm the new pay arrangement in writing.

5. Not Keeping Consistent Records

Your salary increase letter should align with:

• the employee’s contract and any variations
• your payroll system settings
• any internal approval documents (like manager sign-off)
• your staff handbook or pay policies (where relevant)

Good documentation helps avoid disputes and supports smoother management of issues that can arise later in the employment lifecycle, including notice, resignation, or termination.

Do You Need A New Employment Contract When You Increase Salary?

Not always. In many cases, a salary increase letter to employee acts as a simple written variation to the pay term in the existing contract.

However, you may want to update the contract (or issue a more formal deed of variation) if the salary increase comes with broader changes, such as:

• a promotion into a new role with materially different duties
• changes to hours, location, or reporting lines
• new bonus or commission arrangements
• updated restraint clauses (non-compete / non-solicitation)
• moving from casual to permanent employment (or vice versa)

If you’re making a series of changes, it’s often better to consolidate everything into one updated contract so you don’t end up with multiple documents that contradict each other.

Also keep in mind that many small businesses rely on a consistent set of employment documents and policies across the team. If your pay rise is part of a broader HR uplift, you might also consider whether your workplace policies need a refresh.

Key Takeaways

• A well-written salary increase letter to employee helps you confirm the new pay details, avoid misunderstandings, and maintain clean employment records.
• Before issuing the letter, check award/contract coverage, confirm whether super is inclusive or exclusive, and consider any flow-on payroll impacts.
• Your letter should clearly state the new salary, the effective date, pay frequency, superannuation treatment, and that other employment terms remain unchanged.
• If the increase comes with a promotion or major role changes, consider issuing a contract variation or updated employment contract rather than relying on a short letter.
• Clear documentation now can reduce risk later, especially when dealing with payroll disputes, employee exits, or changes to employment arrangements.

If you’d like help updating your employment documents or confirming the right approach for a salary review, you can contact Sprintlaw on 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.