Last week, I talked about why people go the extra mile, and why the things that make a team fight for the cause rarely come down to money alone. However, I do know that there’s a part no business owner can ignore: Eventually, the conversation does come back to pay.
Pay reviews, bonuses, cost-of-living pressures, market rates are real, unavoidable, and often emotionally fraught decisions. And while purpose, recognition and trust create motivation, pay creates stability. It sets expectations, signals priorities, and shapes how your team feels about their future inside your business.
That’s why this week, I want to talk less about employee motivation and more on the mechanics of pay. From the emotional truth behind why people work hard… to the practical reality of how you decide what to pay them; fairly, confidently, and without guilt overruling good judgement.
Purpose does indeed build loyalty, but employee pay is still one of the strongest signals of leadership.
“Fairness is not giving everyone the same thing. Fairness is giving each person what they’ve earned.” Rick Riordan
The Annual Pay Review Cycle Dilemma
When determining pay it can often be easy to confuse fairness with equality, giving everyone the same uplift feels safe, but it blurs the levels of contribution. There is also a feeling that internalises the cost as feeling like it is money “out of your pocket,” even though it’s a business decision. Guilt creeps in because the head and heart rarely speak the same language.
Because pay feels personal – on both sides
Even when we tell ourselves it’s a business decision, it often feels like a verdict on someone’s worth.
Because rises are permanent and that’s pressure
A bonus is temporary. A salary rise accrues every month.
Because you want to be generous, but not irresponsible
You want to reward loyalty, effort, and commitment; you also need to protect runway, margin, and cash flow.
Because you fear disappointment
Business owners often avoid tough conversations because they don’t want to let people down.
Because fairness is subjective
Two people see the same contribution differently.
These human dynamics are why most pay reviews become emotional, rushed, or are avoided unless you build a structure that protects you from yourself.
Tips to Paying Fairly, Not Emotionally
Budget Early
Decide your total reward pot before individual conversations begin. This will protect you from overcommitment and should cover all aspects of your people spend:
- Salary uplifts
- Bonuses
- Changes to allowances
- Spend on development and training.
Simple rule: total increase in people costs should increase slower than your revenue forecast
Segment by Contribution
Reward performance, not tenure. Bonuses should reinforce behaviours you want repeated. Create three buckets:
- High Contributors: exceeded expectations, added measurable value
- Consistent Operators: solid, reliable, steady
- Developing: learning, early in role, or needing direction
This removes emotion and focuses on impact.
Anchor Decisions to Contribution
- High contributors receive the highest uplift
- Consistent operators receive cost-of-living or modest rises
- Developing roles may stay flat or receive symbolic increases
This stops the guilt uplift and creates a clear culture of fairness.
Communicate with Clarity and Transparency
Before you meet anyone, write one paragraph which explains why they’re receiving the increase (or not), what behaviours you’re reinforcing and, critically, what you’d like to see next.
Simple Rule: If it’s hard to articulate…that’s probably a sign the decision isn’t right or ready.
Deliver Conversations With Calm Honesty
Where there needs to be praise, be generous. Where there needs to be recognition, be specific. If the answer is a No, say it, but say it with empathy. Overall people can handle a No, but they won’t respect vagueness or ducking the conversation entirely.
Simple Checklist for Immediate Actions
- Forecast the cost of your pay rises and bonuses before the December payroll
- Define your total reward pot
- Place each team member into a contribution bucket
- Draft a short reasoning paragraph per person
- Schedule your review conversations early
- Review job descriptions to ensure expectations match reality
- Review non-financial forms of recognition: flexibility, development, praise.
Closing Thought
Pay reviews are never just about money. They’re about clarity, expectations, trust, and leadership.
Last week I said: “Pay gets people in the building. But purpose, recognition and trust are what make people fight for the cause.” This week’s truth is the other half: “Clear, fair, structured pay decisions show people that the cause is worth fighting for.”
When you lead pay reviews with confidence and consistency, you don’t just reward work, you are visibly reinforcing culture. And culture is the real currency of performance.
Helping leaders and businesses drive success forward
Here at Nuvem9, we do things a bit differently – we’re not your traditional accountants or financial advisors.
We empower ambitious business owners to grow with clarity and confidence. Based in the UK, we specialise in working in creative and service-led industries that demand a financial partner who gets it — responsive, knowledgeable and always easy to talk to.
Whether you’re scaling up, navigating change, or just need someone who speaks your language, we bring experienced financial and commercial advice and proactive support that keeps your finances clear, compliant, and under control. No jargon. No delays. Just sharp insights and a team who’s got your back.
Want to see if we could be a fit for your business? Let’s connect virtually (we’ll be live, no robots here).
