How Do I Calculate Salary Hikes for Our IT Team? Seeking Advice on Percentages and Standards

Dear All,

I have to start the annual performance appraisal in our company. It's a small IT company with 55 employees. Please help me out in how to calculate the percentage hike once we get a budget from the finance department. For example, the present monthly salary is 1,000,000 and we want to make it 1,200,000. How do we go about the calculations? How do we determine the percentage hike? Please advise and provide me with a detailed flow of calculations.

Also, what should be the percentage hike for the recently confirmed employees whose salary was increased very recently? What is the maximum industry standard (20-25%)?

Regards,
Anupama

Hi Anupama,

10,00,000 to 12,00,000 is a 20% hike as per the current market situation, which is a very good increase. Industry standards vary for different areas; for instance, sales and marketing professionals sometimes receive a hike of up to 30%, whereas for systems and HR, the standard is usually 20%.

Confirmed employees are also given a salary hike, and in some cases, HR may provide a nominal increase after discussing with the reporting managers.

I hope this helps clarify the salary hike scenario. Let me know if you have any questions or need further information.

Best regards

Hike percentages vary; they depend on the following factors:

1. Market growth
2. Sector/Industry
3. Function (HR, sales, marketing, supply chain, administration, technology - networking, securities, web, etc.)
4. Performance of the Company
5. Overall distribution amount with respect to the above listed
6. Performance of the individual and ratings
7. Joining date; if someone has joined in between the performance pay cycle or maybe just before the beginning of the last quarter, the individual might not get a hike equivalent to that given to an individual who is being evaluated for performance during the entire year.
8. Most organizations have distributions as per the bell curve

In the current market scenario, a hike of 20% is considered extremely good. Some organizations may end up giving only a marginal hike in salary this year or perhaps no hike at all. Certain organizations have even reduced salaries with pay cuts ranging from 5% to 25%. In such a scenario, a salary hike is out of the question.

Performance bonus distribution is either being considered in parts, with 50-60% now and the remaining later. Many companies may not distribute a performance bonus at all.

Regards, Nikita

Hi Nikita,

Consider the following:
1. Present market scenario - Hewitt survey says the average increase will be around 8.25%.
2. Individual performance.
3. Strategy of your organization.
4. Functional departments.
5. Last year's bottom line achievement / current year order booking / backlog.
6. Can use the bell curve method.

Dear Nikita,

After completion of performance appraisal, people will be graded A, B, C, D, or E. Employees who are rated between 80-100 are given an A and can receive a 20% increase. Those graded as B can receive a 15% increase, C a 10% increase, and D a 5% increase. For those rated E, there will be no increase. All these decisions depend on the top management's decision.

Please collect a new copy from the Finance Department regarding the budget and look into provisions for salaries, new hires, etc. Only then can you consider a salary hike.

If you are...

Dear Friends,

It's a very good topic. Since the new year has started, every HR professional requires this type of information to upgrade salaries (increments, etc.). If anyone can provide this information in an Excel sheet, it will be appreciated. Hope to share on this current topic.

Regards,
PBS KUMAR

Dear Anupama,

I would suggest that you discuss with the Function Heads and try to categorize employees based on their performance. For example:
- Star: 15% to 20% increment
- Performer: 8% to 10% increment
- Doer: 5% increment
- Outlier: No increment

You can adjust the individual increment percentages so that your overall percentage remains well within your budget.

Dear Friends,

In my organization, I calculate increments by reviewing and tracking all previous increment records of each individual. I am attaching my sheet, expecting it will be a helpful contribution.

Regards,
Brijesh

Dear Members,

In addition to this, could anyone share the performance analysis forms used to analyze the employees' efficiency? Also, how do you grade the employees into several categories in an IT concern?

G Priya Maran
Email: priya.maran@i-waves.com
Phone: 91-9941332695

Hi,

Performance is usually evaluated based on the individual's job role and how well they perform in that role. Additionally, you can assess their Key Result Areas (KRAs) and targets. By reviewing their progress towards these targets, you can determine the extent to which they have met them and then decide on an increment based on management's assessment.

Hi Brijesh,

Sorry to say, but this is not the Excel calculation we are looking for. As an HR professional, we are supposed to maintain confidentiality and integrity. The Excel file you have sent contains information about your company's employees, which goes against the code of conduct. I request you to please delete it immediately and provide only the information that is requested.

Thank you.

Hi,

Performance can be evaluated on:
- Results
- Basic Productivity
- Calibration for Job Performance/promotion
- 360-degree Feedback Mechanism