Well commented, Sajid. However, let me give my humorous side of explanation/comments considering the socio-economic.
Let me also answer in between the question:
I work in an organization where performance appraisals & annual salary increments are considered as two separate activities. I find this quite interesting and intriguing at the same time. This is probably the first company that I have come across practicing this. I would request all members who have been working in Dubai or the UAE to shed some light on this matter. Is this a common practice in this market?
As far as my experience of working in the UAE is concerned, it is not unusual to consider the appraisals and annual salary increments as two separate activities. Salary increments happen in some companies in the month of April, effective January, and in some companies in January itself. Appraisals happen only in well-structured companies, mostly with their collaborating company or partners based in Europe, UK, US, etc.
It is due to the fact that the HR Department is not well-structured here (in most Middle East countries) and has several limitations regarding efficient staff. Mostly, you may see either Office Services or Administration personnel handling HR roles. This will deny the right structuring, career development opportunities, Training requirements, etc., which are very necessary for the growth of a company and its manpower.
If it is, then some questions come to my mind
1. What are performance appraisals used for?
Company objectives vary, and at times, especially if you come from a well HR-structured company, you may see Performance Appraisal as an opportunity to deny any well-deserved promotion/pay rise. However, it is not always the case. There are companies that follow correct policies and procedures to implement performance appraisal plans.
2. What is the basis for suggesting a salary increment?
This depends on several factors, again varying from company to company and the nature of its business and roots. Some companies have a fixed plan of increment for employees, based on different scales or ratios according to the nature and role assigned. Here again, many times, if you are a hardcore HR person transplanted to this part of the world, you may be forced to witness favored employees receiving maximum scores/increment allotment ratios beyond HR-prescribed levels, authorized by management above HR. Office boys, Personal Drivers, PROs, and close associates performing various tasks for key/top management executives fall into this elite category, which you may not be able to control or include in your measures or policies. However, I am sure this scenario is not unique to this region.
3. Who is responsible for proposing the increment figures - the HR team or the Business team?
In many cases, the company allocates a budget increment ratio or budget basket to the Business Team and other teams. They can propose their own percentage ratios for staff to HR for finalization and submission to management. Performance appraisals conducted by the Business Team are rated by the HR department, providing their evaluation to management to finalize this exercise.
4. If there is no linkage between the two, how would a company justify performance pay for employees?
This is also not an uncommon scenario. Many times we see a fixed amount interest or fixed percentage increase regardless of performance, as per company management decision. This may occur in industries with lower profit margins/growth rates, where managements are less inclined to discuss/listen to staff issues related to the rising cost of living, etc. As mentioned earlier, these factors are part and parcel of the local company situation and their vision for employee welfare connected to company growth. I have seen cases where increments as low as 150 Dirhams are approved even during times of escalated living costs, and occasionally high increments are approved two or three times in the same year.
5. Are salary increments scientifically calculated based on company performance & general economic conditions?
Many companies engage external consultants to assist in salary revisions based on economic conditions. Companies with roots outside the Gulf often have well-structured schemes aligned with their parent company's policies and international rules and regulations to determine employee benefits each year. These companies also set real-time targets and growth/profit margins, which are analyzed and discussed during appraisals. New objectives and key targets for the upcoming financial year are issued as per company policy at this time.
As you and many others realize, true HR practice still has a long way to go in this region, requiring significant efforts to make it a reality. I sincerely hope that interactions, useful discussions, knowledge sharing, etc., utilizing non-profitable Self-Help groups like Cite HR, will prove beneficial for implementing measures beneficial to staff in the future. Thank you for raising this topic.
Ramesh Menon