In early career people keep expectation of yearly promotion and higher pay raises. Being a Manager, How do you manage expectations of your employees?

You must clarify the career path structure to your team to ensure that they will be continously motivated without over expectations

By clear ploicies and procedures explained to all staff.

If they deserve then as a Manager you shpuld review and put forth their case before decision maker.

A concrete mechanism / process of appraisels should be made and conmmunicated to each and every employee at the time of their hirings. After completion of their probation periods (if applicable) their immediate bosses should start following that appraisel mechanism. Multiple checks and different levels of analysis should be integrated in these processes. A good organization, and a capable manager should always be careful that each and every effort of their employees and sub-ordinates would be calculated and rewarded accordingly.

No one can deny or expect something which is out of designed mechanism. I am sure such processes not only make the lives of management easier but also give encouragement to employees so they perform better if they really want a boost and prosperity in their careers. 

Profit oriented organizations are very practical & pay as per their value or support to the business. This concept must be rather loudly shared with all employees ( new or old).  Earning & purely learning can not move together. If componaies are still paying to trainees or employees at such an elarly stage means organization is simply one of the best in the world. Horses & etc ? must be differentiated & desrving high performing individuals (new or old) must be satiusfied which is like the very first but prime motivator to retain good employees.