How to Write a Salary Increase Letter to an Employee + Free Templates

Acknowledging your employees' hard work and dedication with a well-deserved salary increase is critical to fostering employee motivation and job satisfaction. 

A salary increase is not just about the numbers. It's about recognizing your people's contributions and letting them know they're valued in their career path.

Our article will guide you through the process of writing a salary increase letter:

• Explore the importance of a salary increase letter to an employee. 
• Get a step-by-step guide on creating one. 
• Copy two templates you can use immediately. 
• Scrutinize 5 examples to suit a range of scenarios in which people would get a salary increase. 

💸 What is a salary increase letter to an employee?

A salary increase letter to an employee is a formal written communication from an employer to an employee informing them about a change in their compensation, specifically an increase in their salary. 

This letter usually details the salary increase, including the amount or percentage of the raise, the effective date of the increase, and the new salary amount.

The letter aims to formally document the change and acknowledge the employee's value to the organization.

Why does a salary increase letter matter?

Consider the salary increase letter as an informational document and a tool to boost morale and reinforce positive performance within your performance management system. 

The letter might also provide context for the increase, such as recognition of the employee's excellent performance, additional responsibilities they've taken on, a cost of living adjustment, or alignment with market rates. In some cases, the letter might also include other information, such as changes to benefits or bonuses. 

According to research conducted by ADP, most employees (63%) identified salary as the most critical aspect of their job. 

By detailing the reasons for the raise, whether it's exemplary project performance, the assumption of new responsibilities, or keeping up with the cost of living, you're not just raising a salary. You're also raising spirits.

Essential elements of a salary increase letter:

• ✅ the current salary;
• ✅ the new salary (either as a percentage or absolute numbers);
• ✅ the date when the changes will come into effect.

This may seem straightforward, but clarity is key. 

Tip: Be direct and precise about the changes, and ensure the employee has no ambiguity about their new compensation.

If applicable, you may also include additional benefits, such as bonuses, commissions, or changes to other compensation structures.

🙌 Looking for employee recognition ideas? Grab 42 ideas to boost employee engagement at your workplace.

✍️ How to write a salary increase letter to an employee

Know what to include in a raise letter

Before you start writing, ensure you have all the necessary details. You should know the employee's previous salary, the amount of the raise, the new salary figure, and the effective date of the change. 

Keep the company's policies and guidelines in mind and any additional benefits or changes to the compensation package that might apply.

Create an outline for your letter

Before you start writing, create an outline. This will help ensure you include all necessary points, maintain a logical flow, and keep your letter concise and professional.

A typical outline might look like this:

• addressing the employee;
• introduction;
• details of the raise;
• reason for the raise;
• closing remarks and conclusion.

Address the letter to the employee

Start the letter with a formal salutation addressing the employee directly. Using the employee's name in the salutation makes the letter more personal and respectful.

Focus on the introduction paragraph

Begin the letter by expressing appreciation for the employee's efforts and contributions. Make sure to keep it genuine and professional. 

For example: "We greatly value your dedication and contribution to our team and want to express our appreciation."

Compose the body of the letter

The body of the letter should include all relevant details about the raise. 

Clearly state the current salary, the percentage or amount of increase, the new salary, and when these changes will take effect. Make sure your language is unambiguous.

As you mention the reasons for the raise, acknowledge the employee's achievements or any specific behavior that led to it. 

This serves two purposes: 

• Reinforcing positive behavior. 
• Making the employee feel valued and appreciated.

For example: "The raise reflects the excellent job performance you have demonstrated and your contribution to the success of our recent project."

Finish the letter with a short conclusion

In the closing paragraph, reiterate your appreciation for the employee's high-quality work, wish them continued success, and offer to discuss any questions they might have about the new pay structure.

While it's important to maintain a professional tone, showing a little warmth in your conclusion can help boost employee morale. 

For instance: "We look forward to your continued dedication and exceptional work."

📝 2 Salary increase letter templates from employer to employee (Formal & informal tones)

If you need a shortcut, use these two templates: one more formal and one with a more casual tone. You can quickly fill or customize them to fit your company's communication style better.

Template 1: Formal tone

Dear [Employee's First Name],

We are pleased to acknowledge your significant contributions to our company over the past [period], particularly your role in [briefly describe a key achievement or initiative].

In recognition of your efforts, we are increasing your total compensation. Effective from [date], your new annual salary will be $[amount]. This represents an increase of [percentage or dollar amount] from your current salary.

We hope this increase underscores how much we value your work and dedication to our team. Your commitment and enthusiasm are crucial to our ongoing success.

Please do not hesitate to reach out if you have any questions regarding this new compensation structure. 

Thank you once again for your hard work and dedication.

Best regards,

[Your Name]

[Your Position]

Template 2: Informal tone

Hey [Employee's First Name],

We've noticed your outstanding job performance over the past [period] - especially when you [briefly describe a key achievement or initiative]. You've been rocking it!

So, here's some great news: we're bumping up your salary! Starting [date], your new annual salary will be $[amount]. That's an extra [percentage or dollar amount] in your pocket. 

We really appreciate the energy and passion you bring to our team. You're a big part of why we're killing it!

If you've got any questions about this new setup, give us a shout. We're here for you.

Keep up the fantastic work!

Cheers,

[Your Name]

[Your Position]

💌 5 Examples of letters of salary increase to employee: 5 Different scenarios

Here are five examples tailored to specific salary increase circumstances.

Letter for a salary increase when an employee asks for a raise

Dear Jessica,

Following our recent salary increase discussion, we have reviewed your request and evaluated your contributions over the past year. 

Under your stewardship, our content marketing efforts have blossomed. Your innovative campaign strategies have boosted our brand visibility by 40% and significantly increased our user engagement metrics. Your adept leadership has also contributed to the growth and development of your team, fostering a positive work environment that promotes creativity and collaboration.

We recognize your efforts and dedication and are pleased to inform you that we are increasing your total compensation. 

Effective July 1, 2023, your new annual salary will be $85,000. This 12% raise reflects both the value you bring to our company and the market rate for a role with your responsibilities.

Please note that your benefits package will remain unchanged. However, you will continue to be eligible for the annual performance bonus, which could boost your total compensation based on our company's performance and your individual contribution to that success.

Please feel free to discuss any further details. Thank you for your continued commitment to our company!

Best regards,

Yara Larsson

Head of Marketing

Effective raise letter to an employee who got a promotion

Dear Rebecca,

I am thrilled to congratulate you on your well-deserved promotion to the position of Team Leader. 

Over the past years, your dedication, creativity, and remarkable sales abilities have significantly contributed to the overall success of our team. Your commitment to meeting and surpassing sales goals and your capacity to motivate team members has not gone unnoticed.

With this in mind, we are delighted to reflect your new leadership responsibilities in your salary. Effective July 1, 2023, your new annual salary will be increased to $70,000.

We are confident you will continue inspiring your team and driving sales in your new role. You are an integral part of our company, and we sincerely look forward to witnessing your further success and accomplishments in this new role.

Thank you for your hard work and dedication. We look forward to your continued success.

Best regards,

Rose Dawson

VP of Growth

Performance review salary increase sample letter

Dear Alex,

Following our recent performance review and assessment of your exceptional work as a Front End Developer, we would like to express our deep appreciation for your dedication and the expertise you bring to our team.

Your innovative solutions, eye for detail, and commitment to maintaining high-quality standards have improved our user interface and significantly contributed to the overall user experience. 

Your work has played a substantial role in helping our clients better interact with our software, resulting in positive feedback and increased customer satisfaction.

We believe that it is important to recognize and reward such outstanding performance. Therefore, we are delighted to inform you that, effective July 1, 2023, we are increasing your total compensation. Your new annual salary will be $90,000.

This increase directly reflects our appreciation for your technical skills, your exemplary performance, and the value you bring to our team and our company.

Thank you for your hard work and dedication. We look forward to your continued contribution and success in the upcoming year.

Best regards,

Dwayne Eriksen 

CTO

Salary increase letter to an employee who got a new certification

Dear Alessandra,

We want to extend our warm congratulations on your recent achievement of obtaining the SCRUM certification! 

Your commitment to professional development and continuous learning truly stands out.

Your new certification greatly enhances our project management capabilities and aligns perfectly with our agile development approach. With your demonstrated knowledge of SCRUM principles and practices, we are confident that we can improve our project delivery times, manage resources more efficiently, and enhance client satisfaction rates.

In recognition of your new SCRUM certification and its value to our team, we are pleased to inform you that we will increase your total compensation. Effective July 1, 2023, your new annual salary will be $65,000.

We look forward to seeing the positive impact of your new skills on our projects and our team.

Best regards,

Mark Ronson

Head of Product

Company-wide salary increase letter (due to costs of living raise)

Dear team,

We regularly review our compensation structures as part of our commitment to maintaining an equitable workplace. 

Given the recent increase in the cost of living, we have decided to adjust our salary scales across the entire organization.

Effective July 1, 2023, we are pleased to announce that all salaries will be increased by 3%. 

This change will be reflected in your August paycheck, showing the new annual salary rate, prorated for the remaining part of the year. 

This increase is designed to help offset the rising living costs, ensuring that your hard-earned salaries continue to provide for you and your families adequately.

We sincerely appreciate your ongoing commitment and hard work. Your contributions are invaluable to us, and this salary increase is just one of the ways we want to show our appreciation.

Don't hesitate to get in touch with the HR department if you have any questions or need further clarification on these changes.

Best regards,

John Doe, 

Chief People Officer

➡️ Need help with announcing promotions to the entire company? Check out our guide on promotion announcement emails.

Things to remember:

• Ensure all the numbers and dates are accurate. Any mistake can cause unnecessary confusion or issues down the line.
• Genuine appreciation can significantly boost an employee's morale and loyalty.
• Encourage the employee to reach out if they have any queries. This openness can help build trust and clarity.
• Always proofread your salary increment letters to ensure it's free from typos or grammatical errors. This shows that you took time and care to write the letter and uphold your organization's professional image.

➡️ Drive a high-performance workplace with Zavvy

Achieving a high-performance workplace doesn't happen by accident. It takes strategic planning, clear communication, and a focus on continuous development. 

At Zavvy, we've crafted an all-encompassing solution that places performance reviews and employee development at the forefront, transforming them from mere administrative tasks into powerful growth catalysts.

Our performance review software offers a seamless way to run meaningful 360° performance reviews. 

Use it to extract unprecedented insights and develop your company strategically, transforming performance reviews from administrative tasks into growth catalysts.

Simultaneously, our employee development software puts growth in the hands of your employees. By connecting leadership skills, career development plans, and training measures, we inspire your team to understand and impact the company's success.

With Zavvy, performance reviews and employee development are not just routine tasks but strategic tools propelling your company toward a high-performance culture.

📅 Book a demo to see how Zavvy will help you take your people's performance and growth to the next level!