Partner - Risk Management
Ed Llarena, Jr.
Owner/ Managing Partner
Agile Solutionist
+1 Other

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Greetings of the day !

Query : I am working in an IT company strength of 25 empoyees . As performance appraisal is done in our company, next step is to increment the salary of employees based on their ratings & salary grade. My query is that - If I rate a employee whose salary is rs. 38000/- p.m. then it gives hike of rs. 9,500/- & If I give same rating to employee whose salary is rs.10,000 p.m. it gives hike of rs.2500/- only. I want to make it normalize in such a way that an employee earning 10,000 p.m. gets reasonable hike in his/ her salary after rating of 25 %. Inspite of rating, i want to give weightage to salary grade also & want to consider other factors also if possible.

Scenerio in our company : Employee ( in Hardware team ) gets highest rating of 25 % & his salary is 23000 p.m. On the other hand, Employee whose salary is 10,000 p.m. gets highest rating of 25% in software team . So employee ( with salary of 10,000 ) is getting very minimum hike as compared to employee whose salary is 23000 p.m.

Kindly provide me some formula that can normalize salary hike .
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Translate the percentages into fixed amounts of money that is on a decreasing pattern based on their job classes or position titles. This way the actual increments of the higher positions with bigger salaries will always be higher than those with lower positions (even if they both get high appraisal ratings).
Best regards.
Salary increments are given either adhoc or in percentage terms.
If you use percentage, then the ones with higher salary get a higher growth.
It makes sense since the person in higher salary bracket presumably contributed more or has more critical skill sets.
So it's a fair deal.
If you feel,that a particular employee deserves a higher amount, you can always deviate from the fixed increment by taking approval of the concerned manager and the business head and explaining why you want a particular employee to get more. Getting into a complex mathematical model for this its self is not worth while. Unless ofcourse, you are dealing with increments for say 1000 people across locations.
Would suggest never try to equate rating and % of salary.
Detach performance appraisal and salary hike
Let's assume a scenario where all your employees are high performers and everybody deserve 100% or 200% hike - but is that viable to offer?
So actual factors affecting salary hike are
1. Cash flow
2. Decision of management in terms of parking how much money for hike, profit etc.
3. Demand and supply of resources
4. Skill complexity, learning curve, market rate etc.
5. Nature of business, operational model
6. Whether the company has enough cash, funding etc.
7. HR Philosophy and values
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