Salary correction

Salary correction or revision

What is salary correction or revision?

In human resources (HR), "salary correction" refers to the process of adjusting an employee's compensation to correct for any discrepancies or errors that may have occurred. 

It is critical for HR departments to manage salary corrections carefully. Clear communication with the affected employees is essential to maintain trust and morale. Documentation of all changes is also important for compliance and record-keeping purposes.

Reasons why salary corrections happen

Calculation errors

In some cases, the initial salary might have been miscalculated. Salary corrections ensure that the employee is compensated accurately according to their contract, job role, and company policies.

System glitches

Software or data-entry errors can lead to incorrect salary amounts being credited to employees. Once identified, these errors are corrected through a salary correction.

Market adjustments

Companies may adjust salaries to align with market rates for similar roles. This ensures that employees are compensated fairly in comparison to industry standards.

Promotions or demotions

Changes in job roles often come with changes in salaries. A salary correction may be implemented to reflect the new role's pay scale.


To maintain compliance with laws and regulations related to labor and compensation, a company may have to adjust salaries. For example, if the minimum wage increases, salaries may need to be corrected to comply with the new law.

Back pay

In some instances, salary corrections involve disbursing any owed back pay due to miscalculations, errors, or delays in previous salary payments.

Benefits and allowances

Changes in benefits or allowances (like travel, housing, or medical) can also necessitate a correction in the salary structure.

Contractual obligations

Sometimes contracts specify conditions under which the salary must be adjusted. Salary corrections help fulfill these contractual obligations.

Tax adjustments

If there is a change in tax laws or if previous tax deductions were incorrect, salaries may need to be corrected to reflect these changes.

What is market correction in salary?

A market correction in salary refers to the adjustment of an employee's compensation to better align with the current market rates for a similar role in the same industry and location. 

This is generally done to ensure that the company remains competitive in attracting and retaining talent. It can also be important for maintaining internal equity among employees, ensuring that people in similar roles are compensated fairly in relation to each other.

Market corrections can be either upward or downward, although upward corrections are more common, especially when employers are trying to retain skilled workers.

Reasons for market salary corrections

Competitive landscape

If a company's salaries are below market rates, it may lose valuable employees to competitors. Conversely, if the company is paying well above market rates without a commensurate increase in value or performance, this can be financially unsustainable.

Recruitment challenges

Companies struggling to attract qualified candidates may look at market salary data as a factor that needs to be corrected.

Employee retention

Keeping skilled and experienced employees is often a priority. If employees discover that they could earn a significantly higher salary elsewhere for the same role, they might consider leaving.

Read: Download employee retention strategy with case study - 500 HRs have benefited!


If there are significant disparities between what different employees are being paid for similar roles within the company, a market correction could help to establish a more equitable salary structure.

Cost of living

Companies operating in areas with a high cost of living may need to adjust salaries to ensure that employees can afford to live reasonably close to their workplace.

Regulatory or union standards

In some sectors, there may be legal or collective bargaining requirements to pay employees a wage that is aligned with industry or regional standards.

Business strategy

As companies evolve, they may shift their focus, which can include changing the kinds of roles that are most important to their business. In such cases, market corrections might be applied selectively to roles that have become more crucial.


Over time, the cost of living generally increases, and salaries may need to be adjusted to keep pace with inflation.

How to do market salary correction?

How to do market salary correction

Market research

HR departments or external consultants usually conduct comprehensive research to understand the prevailing market rates for various roles.

Check out: Salary insights by Michale Page

Gap analysis

A comparison is made between current salaries and market rates to identify discrepancies.

Planning and budgeting

Before making adjustments, the financial implications are considered, and the necessary budget is allocated.


Salary adjustments are rolled out, often after performance reviews or at the start of a new fiscal year.


Transparency is key. Employees should be informed about the changes and the rationale behind them.


All changes should be documented for compliance and record-keeping.

By regularly assessing and correcting salaries as per market standards, companies can ensure that they continue to attract, retain, and fairly compensate their employees.

Salary revision letter format + example

Here are the formats for the salary correction letter. Choose a format based on your use case.

Please adjust the letter according to the specifics of your situation. Also, ensure that you follow any legal requirements and consult HR experts as necessary. A copy of the letter should be kept for company records and any additional documentation required should be completed.

Frequently asked questions

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