How to manage salary setting expectations sensitively

two coworkers talking in a meeting setting

Employee salary increase expectations and the amount employers intend to pay are at odds.

For the latest edition of Hays Salary Guide FY25/26, we spoke to more than 12,000 survey respondents across Australia and New Zealand to gather their views on salary policy, hiring intentions and recruitment trends.

Dig deeper into the actual size of salary increases that employers intend to pay, and employees expect to receive, and you can see that those differences extend further.

Our research shows that the salary expectation gap continues to be the case for many organisations and their workforce.

How to manage a salary expectation gap sensitively

There’s no doubt that most employers expect and prepare for some challenging salary discussions. When a hiring manager or employer asks, “What are your annual salary expectations?”, it's often the starting point of a conversation that requires care, context and transparency.

For some roles, expectations may be influenced by external benchmarks like minimum wages, industry standards, or market conditions, even if your organisation sets salaries well above those thresholds. To build engagement and reduce turnover, communicate transparently with employees about the salary negotiation process.

1. Explain your salary-setting rationale

Your employees are more likely to accept your salary offer if they understand the rationale and context behind it - even if it differs from their ideal salary expectations.

Salary satisfaction is subjective. Our findings show that:

60% of professionals believe they're underpaid
28% were dissatisfied with an increase between 10 and 15%
36% were dissatisfied with an increase between 15 and 20%

For this reason, it’s important to:

Have frank and transparent conversations with employees about your organisation’s salary policy.
Build understanding with your employees by contextualising your grounds for the salaries you set.
Be transparent about how salary increases are determined.
Communicate with your employees about your organisation’s performance, budget and the wider economic climate.
Share how their role fits within this wider context.

For the most accurate benchmarks when managing remuneration expectations, refer to our latest guide for typical salary ranges relevant to specific roles and industries.

2. Promote other benefits on offer

The salary increase you offer employees can be more attractive if you frame it as one (admittedly, major) element of the overall compensation package. The additional benefits you offer are just as important to most employees as the financial salary. While money is, and always will be, important, improving the benefits on offer can be highly rewarding and motivating for staff.

3. Provide opportunities for promotions

Providing employees with an opportunity to work towards a promotion presents them with a clear path to a higher salary. You can help to manage a salary expectation gap by showing them the long-term value of their position and performance.

By linking promotions to specific performance metrics, you can offer transparency around the results that would qualify them for promotion and a future salary increase. There are also retention benefits. A lack of career progression is a common factor motivating people to search for a new job.

You can improve career progression opportunities for your staff in a number of ways, such as:

Matching employees with appropriate mentors.
Entrusting them with new challenges.
Planning a detailed career path together.

Such actions can be powerful in negating the detrimental impacts a minimal salary increase can have on employee engagement and turnover.

4. Offer skills development

With the increasing use of AI, everyone’s learning curve is being tested. Our report discovered that human skills like communication, teamwork, and adaptability need to be nurtured more than ever before.

Upskilling top talent can help manage a salary expectation gap. It also allows you to build new capabilities into your organisation.

To assist, we offer a free training portal, Hays Learning to help you give your teams access to courses to develop their skills.

You could also consider using in-house subject matter experts to build the skills of your workforce and give your employees opportunities to learn on the job.

5. Provide greater flexibility

If your employees are expecting a higher salary than you can offer them, you could also consider the merits of providing them with greater flexibility in how they get their jobs done.

This year, 58% of people ranked flexible working as the most important benefit. However, for desk-based employees, hybrid working is now an expected norm. To bolster this new normal, consider offering four-day work weeks or additional annual leave.

Find a solution that benefits both parties

Although it looks like employers and employees might be at odds regarding salaries in the coming year, organisations still have plenty of scope to negotiate outcomes that both parties are satisfied with.

So, before sitting down for salary conversations with your staff this year, consider what additional options you could offer to help align expectations.

Download Hays Salary Guide

Hays Salary Guide FY25/26 features data from over 12,000 professionals across Australia and New Zealand regarding average salaries and insights relevant to various industries.

Download Hays Salary Guide FY25/26