Pay reviews when you have no salary bands
Small companies set pay case by case and then discover, three years in, that the structure they never designed has designed itself badly.
A company with six people sets pay by negotiation. Each appointment is priced against what the market seemed to demand that month, what the candidate asked for, and what the business could bear.
This is reasonable and it accumulates. By the time there are twenty people, the pay structure is a record of hiring conditions and negotiating confidence over four years — and it is internally inconsistent in ways that are invisible to management and entirely visible to employees.
The inconsistency has a predictable shape
Two patterns recur in almost every small company that has not addressed this.
The first is that recent hires are paid more than longer-serving people doing the same work, because market rates moved and existing salaries did not. This is the most common cause of a resignation that management describes as coming out of nowhere. For a related product-level perspective on annual work hours, see this link.
The second is that pay tracks negotiating behaviour rather than contribution. People who ask are paid more than people who do not, and who asks is not randomly distributed — it correlates with confidence, with background, and with characteristics that employment law takes an interest in.
List everyone, their role, their pay and their start date. Look for people doing comparable work at materially different rates. This takes twenty minutes and it is the exercise most small employers have never done.
You do not need formal bands to have a structure
Full salary banding is disproportionate below a certain size. What is proportionate is a defensible logic — something you could explain to an employee that does not reduce to how the negotiation went.
A workable minimum is a small number of levels, each with a range and a short description of what distinguishes it: scope of decision, degree of supervision required, breadth of the work. Three or four levels covers most companies under fifty people.
Review everyone at once, on a cycle
Pay decided reactively — when someone asks, or when a resignation is threatened — rewards the threat rather than the work, and it teaches the team how to get a rise.
An annual cycle in which every salary is considered, whether or not anyone asked, removes that dynamic. It also means the uncomfortable comparison is done deliberately once a year rather than discovered accidentally. For broader independent guidance on this point, consult Occupational Employment and Wage Statistics.
Say what the cycle is and stick to it
Employees should know when pay is reviewed, on what basis, and when they will hear. Uncertainty about this produces a background hum of speculation that costs more attention than the money involved.
If the business genuinely cannot fund increases in a given year, say that clearly and early. People handle a bad year they were told about far better than a review that quietly does not happen.
Separate the pay conversation from the performance conversation
Holding them together means the performance discussion is conducted by someone waiting to hear a number, and nothing else said in the meeting is retained.
Run the development conversation on its own cycle, and communicate pay separately and briefly. The reasoning still needs to be given — a number with no explanation is the version that generates resentment.
Where you cannot compete on salary
Small employers frequently cannot match larger competitors on cash, and pretending otherwise is transparent. What they can do is be precise about what they do offer: breadth of work, proximity to decisions, autonomy, flexibility, shorter commutes, less process.
That only works if it is true and specific. 'We're like a family' is not an offer. 'You will own this area, decide how it runs, and there is no approval chain above me' is one, and it is worth real money to some people.
It also has a limit worth acknowledging: non-cash advantages do not compensate for pay that is materially below market. Below that line, the interesting work is a reason to stay one more year rather than a reason to stay.