1 hourMedium

How to Negotiate a Pay Rise Clause

Negotiate a pay rise clause by proposing an annual salary review mechanism, specifying whether increases are discretionary or guaranteed, linking to benchmarks such as CPI or RPI, and including performance-based triggers where appropriate.

Last updated: February 2025

Step-by-Step Guide

1

Decide on the type of pay review mechanism

Choose between a discretionary annual review, a guaranteed minimum increase, an inflation-linked increase, or a performance-based trigger.

Tips
  • •Discretionary reviews give the employer flexibility but offer the employee less certainty.
2

Propose specific terms

Draft the proposed clause with clear language specifying when the review happens, what benchmark is used, and what the minimum or expected outcome is.

Tips
  • •CPI is now more commonly used than RPI for inflation linking.
3

Negotiate the terms

Present the clause as part of the overall compensation package. Be prepared to trade off against other benefits such as bonus or equity.

Tips
  • •Employers may prefer discretionary reviews; employees prefer guaranteed minimums.
4

Document the agreed terms

Ensure the final clause is clearly worded in the employment contract, distinguishing between a right to a review and a right to an increase.

Tips
  • •A right to a review does not guarantee a pay rise; a right to an increase does.

Legal Requirements

There is no statutory right to annual pay rises in the UK, but employers must ensure pay does not fall below the National Minimum Wage. Pay review clauses are contractual and enforceable according to their terms. The Equality Act 2010 requires equal pay for equal work regardless of gender.

Common Mistakes

Confusing a right to a pay review with a right to a pay increase
Not specifying which inflation index is used (CPI, RPI, CPIH)
Failing to state what happens if the employer does not conduct the review

Template / Example

The Employer shall review the Employee's salary annually on [Date]. The Employer will consider the Employee's performance, market conditions, and the Consumer Price Index. Any increase is at the Employer's discretion [OR: The Employee's salary shall increase by no less than CPI annually].

When to Get a Solicitor

If negotiating a senior hire package with guaranteed increases, equity-linked compensation, or complex performance bonus structures.

FAQ

Is an employer legally required to give annual pay rises?

No, unless the employment contract contains a clause guaranteeing increases. Employers must only ensure pay meets the National Minimum Wage or National Living Wage.

What is the difference between CPI and RPI for pay rises?

CPI (Consumer Price Index) typically gives a lower figure than RPI (Retail Price Index) as it uses a different calculation method. CPI is the government's preferred measure and is increasingly used in contracts.

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This is guidance, not legal advice. Consult a solicitor for complex matters.

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