How to manage a salary expectation gap

two coworkers talking in a meeting setting

Employee salary increase expectations and the salaries 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.

A 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 employers should expect and prepare for some challenging salary discussions.

To build engagement and reduce turnover, communicate transparently with employees about salary increases.

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%

Here are some tips for managing remuneration expectations with staff:

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 to ensure you're on the same page.
Communicate with your employees about your organisation’s performance, budget and the wider economic climate.
Share how their role fits within this wider context, including how their qualifications compare to others in similar roles.

For the most accurate benchmarks when determining pay increases, refer to our latest guide for typical salary ranges relevant to specific roles and industries.

2. Promote the full benefits on offer

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

The majority of workers (35%) who moved organisations last year left because of low salaries. If budgets are tight, reward employees with benefits to bridge the gap between pay expectations.

As this year’s Hays Salary Guide FY25/26 shows, employers are offering at least 25 different benefits - but very few are truly valued. Speak to your team to understand what benefits are most important to them and offer personalised perks accordingly.

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 for employers. In the last year, 32% of workers who moved jobs did so due to a lack of career progression. Learn how you can improve career progression opportunities for your staff:

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 and learning development

Considering the ever-increasing prevalence 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 by allowing 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 salaried employees are expecting more money than you can offer them, you could also consider the merits of providing them with more 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 expectation rather than a perk. To improve this new normal, consider offering four-day work weeks or extra annual leave.

Find a win-win solution

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 and support ongoing employment satisfaction.

Download Hays Salary Guide

Whether you're preparing for a job offer with candidates or annual reviews with existing staff, it's important to do your research Hays Salary Guide FY25/26 features data from more than 12,000 employers and employees. Download it today and gain access to typical salaries and insights relevant to your industry.

Download Hays Salary Guide FY25/26

How to manage a salary expectation gap – sensitively