Navigating Salary Appraisals: How to Explain Unequal Raises to Top Performers

Hi,

Please forward me the layout for the Salary Appraisal that can be maintained by the HR executive. It should specify the salary increases in past years and the current salary with complete employee details.

According to an appointment letter, the salary of an employee is reviewed in January every year. If the employee joins in Oct/Nov, will his salary be revised in January the following year?

If the company is increasing the salary based on slabs, there are two employees - one is performing well and the other is average. Now, the person who is performing averagely, just to bring him into one slab, his salary is increased more than the person performing well. How can we convince the good performer why his salary is increased less? If we explain the slab concept, he is not convinced, and we risk losing a good employee. What should we do in such a case?

Hi Shweta,

Please note that the salary slab is a highly sensitive area, and we can only follow it without making any modifications.

Generally, when an employee completes the training period, based on their performance, they will be put on probation with a salary slab. If an employee joins in probation and successfully completes it based on their performance appraisal from the department head, they may be confirmed without any increase in salary. In that context, they will be due for a performance appraisal from one year to the date of probation. Based on the performance appraisal, the confirmed employee will receive a salary with or without a promotion.

Additionally, please note that the majority of companies maintain confidentiality about employees' salaries, and even an employee may not know their colleagues' salaries. For the organization, it is essential to retain good, better, and best employees.

The organization will discuss with the concerned department heads, and based on the appraisal, it will provide a number of increments/salary hikes, mostly during the performance appraisal. Typically, low performers will receive either a single or no increment or hike during the performance appraisal, and this may be explained to them so they can understand and improve their performance.

I request you to verify the salary slabs and utilize them appropriately in your present situation with the approval of both department heads and your HR manager. Please note that changes in salary slabs may create more problems, and instead of positives, you may face negatives.

Regards,

PB Ram Swaroop

Thank you for sharing.

However, could you provide advice on how we can retain good employees considering that appraisals based on slabs might create some problems? Additionally, could you assist me in creating a questionnaire to gather feedback from employees about the company, any challenges they may be facing, and their thoughts on the work atmosphere?

Thank you.

Please find some suggestions on your queries:

1. If the employee joins in the month of Oct/Nov and the company's annual salary increment cycle is in the month of Jan, then it is not advisable to provide a salary increment as it will be too early to judge. Secondly, that would be the time when his probation confirmation will be due. If your company has a policy of providing a salary increment on confirmation, then you can probably do it, but as far as the annual increment is concerned, it is not advisable.

2. Salary increments should be based on the following factors:
a. Individual Performance
b. Company Performance
c. External factors like inflation/market adjustments, etc.

I think you need to reconsider your salary grades and bands. What I understand from your query is that the average performer and the performer are from the same job position and have similar education, experience, and skill sets. If they have similar education, experience, and skill sets, the average performer's salary being more than the performer's salary would surely demotivate the performer. Your salary bands should be designed in such a way that the average performer and star performer with similar competencies should fall in the same band and grade, but the star performer should still be getting a higher salary than the average performer.

Please let me know if this has solved your query, or let me know if you need any further information.

Dear Shweta,

Salaries are planned to keep some percentage as performance-linked too. It also depends a lot on the salary negotiated by an employee during joining. Even if people join in the same band, they join at different salaries. Consider as I have explained below:

Employees A & B have the same education, skills, and experience and have joined in the same band with a salary range of 4 - 6 Lakh per annum.

Employee A is a performer with a joining salary of 4.5 Lakh.

Employee B, a non-performer, negotiated well and joined at 5 Lakh per annum.

Performance is appraised in 1 year and distinguishes the performer from the non-performer.

If you have set aside 20% of the CTC linked to performance (PLS), then there could be a case where A gets 20% in full as a recognition of his performance, and B gets zero.

This means A receives his full salary (4.5 Lakh), and B receives 4 Lakh in effect. Also, give a special recognition letter to the performer to keep the performer motivated and warn the non-performer to improve or quit.

Salaries are kept strictly confidential as a rule. Companies terminate employees who discuss their salaries in public. So, discourage anyone who comes up to the HR desk with a logic that the other person is getting more than me, etc. You also need to explain that it depends on the joining salary, the person's hiring company, academic performance, etc. An interview is not always successful in differentiating a performer from a non-performer.

If you stay with the company, you will definitely be recognized and rewarded for your performance.

Thanks,

Geeta

Dear Geeta,

Your answer is not practically applicable regarding options A & B in this modern age. Everybody wants some increment; it should be less but not negligible.

Best Regards,
Sajid Ansari

True, everyone wants an increment, and I am facing the same problem as I am new to this field. Making an employee understand the slabs, performance, etc., is tough for me. Please, can you help me out? How should we convince them?

Hi, I just gave extremes of the two cases; one has to work out in between. For example, you may decide to offer a somewhat lower percentage of increment too. Your compensation relative to performance (PLS) can be structured as follows:

- Star performer: full + X% reward (you may determine the percentile variables)
- Meeting expectations: Full
- Average performer: Full - X%
- Poor performer: No variable incentive (implicitly suggesting exploring other options)

These are merely suggestions; one must customize the options based on their specific requirements and feasibility. Additionally, in all scenarios, it may be necessary to substantiate your decisions with relevant data from appraisals, counseling, mentoring, recognition letters, or warnings.

In a broader context, your compensation policy should explicitly outline the percentage of PLS awarded to employees based on their performance level. This clarity helps minimize inquiries for explanations.

Thanks,
Geeta

Hi,

The performance appraisal itself denotes that the appraisal should be based on performance. How can you give the same increment to two persons with different performances? The appraisal should be made based on criteria of performance, for example: Average, Above average, Outstanding. The increment can be given as a percentage (%) based on the criteria to which the employee falls. In this way, you can motivate the employee to improve their performance.