Confirmation of increase in pay letter

A salary increase is about more than giving someone good news, although that’s an added bonus. A salary increase letter (sometimes called a raise letter or salary adjustment) protects you legally, keeps payroll running smoothly and shows employees that their contributions are seen and valued. Which can directly impact retention, productivity and team morale

Handled well, this piece of paper (or PDF) strengthens the employer-employee relationship. Handled badly, it leaves room for payroll errors, misunderstandings around job responsibilities, or worse, mistrust about whether the raise is real.

This guide will walk you through when to use an increase in pay letter, how to write one, what compliance elements to look out for and provide you with a salary increase template you can use straight away.

What is an increase salary letter?

An increase salary letter is the formal document that confirms a change in an employee’s salary. While you may have already discussed the raise in person, the letter makes it official.

The letter should include:

• The employee’s current salary
• The new salary or new annual salary
• The effective date of the change
• The reason for the raise (promotion, market adjustment, annual review or exceptional performance)
• Any new job responsibilities tied to the raise
• A note to express appreciation for their positive impact

It’s important for employers and managers to monitor for opportunities where a pay increase may be in order. After all, employees who feel undervalued are more likely to test the job market, and replacing them comes with recruitment fees, onboarding costs, training time and the inevitable dip in productivity while a new employee gets up to speed.

When to write a salary increase letter

You should issue a salary increase letter whenever there’s an increase change to an employee’s salary. This helps to provide clarity for your employee and recognise their hard work. Common situations include:

Performance increases

When an employee delivers outstanding results, a pay raise linked to specific employee contributions makes the recognition real.

Promotions or new roles

If an employee moves into a new job title or takes on new job responsibilities, a salary adjustment letter should confirm both the role change and the new salary.

Market adjustment

If salaries in your industry rise, you may need to issue a market adjustment so employees don’t feel undervalued. A clear letter reassures them this is about alignment, not a reflection of past performance.

Annual salary reviews

Many businesses conduct yearly reviews where a raise is part of the process. A salary increase letter ensures every employee knows their exact new annual salary and when it begins.

Retention and counteroffers

If you increase pay to retain an employee considering another offer, documenting the decision avoids future disputes. The letter can make clear if it’s permanent or part of a retention program.

Probation or milestones

When an employee completes probation or hits a milestone tied to pay, the raise letter should confirm the details and reinforce that they’ve met expectations.

Wherever possible, issue the letter before payroll runs. Retroactive changes are messy, and employees will always check that their first pay at the new rate matches what you promised.

How to write a salary increase letter

The best letters are clear, formal enough to stand up in an audit, but still human. These should be timely and delivered to your team member shortly after you’ve notified them verbally about the increase. Here’s how to structure one.

Step 1: Confirm the increase right away

Open with a direct line:

“We are pleased to confirm your annual salary will increase effective 1 July 2025.”

This avoids any doubt about whether the letter is good news.

Step 2: List the salary details

Spell out the current salary, the new salary and the effective date. Percentages can also help give clarity. For example:

“Your current salary of $58,000 will increase to a new annual salary of $63,000 effective 1 July 2025. This reflects an 8.62 percent increase.”

Step 3: Give the reason

Explain the “why” behind the change. Was it performance, a market adjustment, or new job responsibilities? Be specific so it doesn’t feel generic.

Step 4: Acknowledge role changes

If the raise comes with a new job title or added scope, capture that here:

“In your new role as Senior Project Manager, your responsibilities will include managing the national rollout and supervising two new hires.”

Step 5: Cover payroll and benefits

Clarify if the raise affects benefits or contributions. Don’t estimate take-home pay, that’s for payroll to calculate.

Step 6: Express appreciation

This is the human touch:

“We would like to express appreciation for your creative problem-solving and consistent leadership.”

Step 7: Close with next steps

State whether the employee needs to sign the letter or whether the change will be processed automatically.

Salary increase letter templates

Here’s a preview of the letter template you can download and customize based on your requirements:

Considerations for managers and employers

Behind the good news is some important admin. You should always notify your payroll team the moment you commit to a raise. Here’s what to double-check:

• Effective dates: make sure the payroll team has the right start date.
• Taxes and deductions: confirm whether the new salary affects benefits or contributions.
• Record-keeping: store the signed salary increase letter in the employee’s HR file.
• Transparency: consistency in communication avoids claims of unfair treatment.

It’s easy to assume a raise announcement will always be smooth sailing. But employees sometimes ask tough questions on the spot. Managers should be ready to:

• Reconfirm the exact new salary figure and date.
• Explain whether the raise is tied to new job responsibilities, a market adjustment, or performance.
• Be honest if the increase is company-wide (such as annual reviews).
• Express appreciation with a specific example of impact.

Avoid making promises about future raises. Keep the focus on the current change. If you’re preparing to share the good news of a raise, our salary increase letter gives you the wording, structure and safeguards you need.

Download the template and start personalizing it for your employee.