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Free letter template · Word

Compensation Adjustment Letter

A compensation adjustment letter informs an employee that their pay has been adjusted after an internal pay-equity or parity review found it below the range for their role, grade or peers. It explains the review, the adjustment and that it is separate from the annual increment.

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Preview of the letter

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[Company Logo][Company Name]

COMPENSATION ADJUSTMENT LETTER

Ref. No.:
[Reference Number]
Date:
[Date]

Private and Confidential
To,
[Employee Name]
Employee ID: [Employee ID]
[Designation], Grade [Grade]
[Department]

Subject: Adjustment of Compensation Following Internal Pay Review

Dear [Employee Name],
[Company Name] recently completed a review of pay across roles of similar scope, grade and experience to ensure our compensation is fair and consistent. As an outcome of this review, we are adjusting your fixed compensation.

ParticularsBefore AdjustmentAfter Adjustment
Annual Fixed Pay (₹)[Amount][Amount]
Monthly Gross (₹)[Amount][Amount]
Annual CTC (₹)[Previous CTC][CTC]
Position in Grade Range[Below minimum / Lower quartile][Within range / Mid-point]
  • This is a one-time equity adjustment and is not linked to your performance rating.
  • You will remain eligible for the annual increment cycle as per policy.
  • The adjustment is effective from [Effective Date] and will appear in the salary for [Month YYYY].
  • Component-wise details are in the attached annexure.

We request that you keep the details of this letter confidential. If you have any questions about the review, please speak with [HR Name].

Regards,

For [Company Name]
[Authorised Signatory]
[Designation]
Acknowledged by
[Employee Name]
Date: [Date]

What this template includes

  • Description of the review undertaken
  • Statement that the adjustment is not a performance increment
  • Current and adjusted fixed pay
  • Position in the pay range after adjustment
  • Effective date
  • Confidentiality

When to use it

  • After a gender pay-equity or internal parity audit
  • Bringing an employee hired at a low point of the band into range
  • Aligning pay after grade re-mapping or job evaluation
  • Fixing compression where newer hires earn more than experienced staff

How to customise this template

  1. 1Describe the review in one neutral sentence
  2. 2State the band or range position if your company shares bands
  3. 3Clarify whether the annual increment will still apply
  4. 4Remove range details if bands are confidential

HR tips

  • Do not name peers or reveal their pay
  • Frame the adjustment positively, without implying past wrongdoing
  • Fund equity adjustments separately from the merit budget
  • Document the methodology internally for audit

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Frequently asked questions

What is a compensation adjustment?+

It is a pay change made to correct internal inequity or bring pay into the approved range, rather than to reward performance.

Will I still get my annual increment?+

Usually yes. Equity adjustments are typically separate from merit increments, but check the letter for how both will apply.

Does equal pay apply in India?+

Indian law requires equal remuneration for the same or similar work regardless of gender. Pay-equity reviews help employers stay aligned with this principle.