Dinesh Divekar
Business Mentor, Consultant And Trainer
Ed Llarena, Jr.
Owner/ Managing Partner
Jhuma Tiwade
Manager- Human Resources
V. Balaji
Ir & Hr

We are a mid sized light engineering company engaging about 250 manpower. We intend to separate the appraisal process from annual increments.What would be the impact in case we conduct Appraisals in a particular month and disburse increments after 3 months
From India, Haryana
Dear friend,
First and foremost, when you ask a query business etiquettes demand disclosure of your name and designation.
Secondly, the category of your post is also inappropriate. You should have raised this query in "Performance Appraisal Management" category and not in "CiteHR Website Support".
If you de-link appraisal and salary increment then what would be the basis of salary increment? Secondly, you have written that you wanted to disburse increments after 3 months. Therefore, anyway you are linking PA and salary increments, albeit belatedly.
If possible please give here your complete PA process. Any suggestions can be given then only.
Dinesh V Divekar

From India, Bangalore
Normally an appraisal takes about a month with the current size of staff. Unneccessary draging of the increment rights will only agitate and demotivate the staff.Your concern here seems to be of immediate attrition post appraisals and increment, correct me if I am wrong.
What you can otherwise do is to create a policy and decide a lumpsum amount as increment to be dispersed on quaterly basis. For eg; If you give an increment of 1 lac per annum. You can disburse the same 25k in each quater.
Also you can divide the whole increment into a certain % hike in salary and rest as lumpsum retension bonus to be given after a certain period. Many IT companies follow this trend.

From India, Mumbai

Many organizations worldwide have shifted their compensation strategy from the traditional annual merit increases to the more logical performance-based adjustments. You will be on the right track if you start implementing it in your organization now.

Organizations have realized that the traditional annual merit increase strategy is a heavy burden to them. Indeed, these organizations have been increasing their payroll cost from 5-10% year on year, yet the "value added" to the company by many employees are very insignificant. Hence, it appeared that the increments were more of "seniority and inflation factors related" than "rewards for good performance". Indeed, why should the company reward non-performers every year when they are paid their salaries already?

Shifting your compensation strategy to a performance-based system will make it more rational. But you will need a good Performance Management System (PMS) as a tool to implement a legally defensible methodology that will justify why only a few will get rewards/ increases every year. Without a good PMS, you will be swamped by complaints and the transition may be difficult for you to handle.

Should you need help in this area (set up of a good PMS), my company can help you. We specialize in this and have served organizations worldwide.

Best regards.

Ed Llarena, Jr.

Managing Partner

Emilla International Consulting Services

From Philippines, Parañaque
Yes, Performance Appraisal is normally used as tool to award/reward increments, promotions, etc. However, performance appraisal system is a system that needs to be looked at scientifically. Actually this system helps an organization approach managing performance of indidividuals holistically. By this, apart from deciding increments, etc. there is an opportunity for the employer to understand how good the individual is in his current position, potential to shoulder or manage higher responsibilities, career planning, successing planning, etc.

However, many organizations do not take this exercise seriously and only during the annual review, this is done hastily and handed over to HRD department. By this approach the whole purpose is defeated.

Increments are not mandatory. There is no legal binding on an organizaton that they must extend increment to the employees. An organization hires someone to perform certain functions for which fixes up a mutually agreed remuneration. As long as he does this to the satisfaction of the organization, the organization is bound to pay him the agreed remuneration. However, there may be chances that the employee does not perform well in the given portfolio (as intended), then the company can look at this differently.

Therefore, paying increment comes only when you excel well in your performance, contribute more to the organization and demonstrate high degree of potential to take more and higher responsibilities. So considering someone in that poisition and paying higher salary is more relevant in this case. And it is in this context, Performance Management System has come into play a roll to assess his suitabilit.

Otherwise, there is nothing that would hold you back to delink your increment system from Performance Appraisal review.


From India, Madras
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