Understanding Appraisal Hikes: How Should Performance Affect Salary Increases?

Hi Everybody,

I want to know about the structure of the appraisal process. I will provide a scenario to make it easier to understand: An employee has been working for more than 2 years, and their performance is rated as good. Let's say they are currently receiving a CTC of 2.4 lakhs. In this case, what kind of hike should we give?

If the same employee's performance is average, what hike should be given?

Please explain to me the current trend that the industry is following. I want to know the role that performance bonuses, as well as CTC or basic salary, will play in the appraisal or hike process.

Thanks in advance,
Hari Prasad.

Hello Prasad. Your question should not be answered in isolation. The performance and reward system needs to be designed in its totality. Answers to specific questions will then drop out. In designing the system, some questions to ask and answer are:
How much money is available each year for distribution?
Will distribution be contingent upon a certain minimum level of profit?
Will rewards be in the form of salary increase, one off bonus, or a combination of both?
How will financial rewards align with other non-financial incentives?
How will rewards be distributed according to appraisal ratings?
Answers to these questions will vary from company to company and will depend on each company's objectives for its rewards system.
Vicki Heath
Human Resources Software and Resources
http://www.businessperform.com

Hi Prasad,

As Vicki has mentioned in the email, the budget is an important factor for rewards and increments. In addition to that, you will have to keep in mind the industry pattern of salary hikes and increments. Studying the industry patterns will make it easier for you to retain employees and lower attrition rates.

Cheers,
Archna

Hi Prasad,

I am in total agreement with Vicki & Archana as the budget & the Industry pattern knowledge are essential for the Appraisal. Along with that, the profile of the need, i.e., the capacity in which he is working with the organization, is equally important as the industry of an HR & SW engineer can be the same; the amount of increment will vary depending on the profile rather than the Industry trend.

Let me know if you have any questions; I will share my opinion on the same.

Warm Regards,
Geeti

Hi Prasad,

I agree with everyone here. One of the most important factors is how much value he is adding to the organization. What competencies has he developed over the year and how close is he to the next promotion?

Manoj Minocha

Hi Manoj,

Thanks for the input, but in general, how do we evaluate competency and competencies for the software people? Can you give me an idea for this so that it will be helpful for me?

Cheers,
Hari Prasad

Hi Vicki,
How much money is available each year for distribution?
Will distribution be contingent upon a certain minimum level of profit?
Will rewards be in the form of salary increase, one off bonus, or a combination of both?
How will financial rewards align with other non-financial incentives?
How will rewards be distributed according to appraisal ratings?
Question above which you asked im giving few answers:
1)Will distribution be contingent upon a certain minimum level of profit?
yes,distribution will be based on profit,but it will be on the basis of performance bonus quaterly.
2)Will rewards be in the form of salary increase, one off bonus, or a combination of both?
Yes, it will be based on both for senior members will be added in CTC anually.
3)How will rewards be distributed according to appraisal ratings?
we have competencies & competency based eval system based on that appraisal rating is decided.
Cheers
HariPrasd

Hi Archna,

How do we update ourselves on the salary hikes and increments according to industry patterns? Can you help me with this? I want to conduct reviews for Software Engineers and Senior Software Engineers every three months, and for Team Leads and Managers annually. I am also interested to know whether yearly increments are better or if quarterly increments would be more suitable for appraisals. Please differentiate between the two and advise on the best approach to take and how to implement it.

Cheers,
Hari Prasad

A new method of performance management and total reward system has been followed by modern companies since the 1990s. This includes compensation, benefits, work experience, performance recognition, and career development opportunities. Could anyone tell me how this new concept can be translated into Hari Prasad's case?

Cherish Mathew