Are There Mandatory Rules for Annual Employee Increments? Let's Discuss!

Hi All, Are there any rules and regulations for giving annual increments to employees? Does this mean that we have to give a fixed percentage to employees annually?

Regards,
T. Sivakumar

Annual Increment Guidelines

Annual increment is not compulsory as per S&E. It is mostly dependent upon the financial growth of the company. The average increments, depending on the financial growth of the company, are between 10-30% plus a Performance Bonus, if any.

If your salary structure is not linked to the W/S and Consumer Price Index, and unless you are not under contract on a fixed pay for a particular period, it is warranted that the employees are compensated towards the general rate of inflation as well as for their loyalty and prosperity. Otherwise, the salary of the employees will stagnate, and the employees (read Talent) will lose interest and start looking for better avenues of income or employment.

Hello,

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User Input:
smbhappy
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Join Date: May 2010
Location: The City Beautiful - Chandigarh
Posts: 199
Re: Rules for Annual Increment of S&E

If your salary structure is not linked to the W/S and Consumer Price Index, and unless you are not under contract on a fixed pay for a particular period, it is warranted that the employees are compensated towards the general rate of inflation as well as for loyalty and the prosperity of the employees. Otherwise, the salary of the employees will be stagnated, and the employees (read Talent) will lose interest and start looking for other better avenues of income/employment.

Thanks and Regards,
Surendera M. Bhanot
CEO - Avis Software
The City Beautiful - Chandigarh
+919-888-810-811
Email: surendera@avissoftware.com
Chat: bhanot1952@gmail.com

Thanks,
smbhappy, this is a valid answer for me. If my organization is earning good profit, would I (my colleagues) be liable for any share in it according to the law? Please answer.

Regards,

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I hope this helps! Let me know if you need further assistance.

Otherwise, owing to inflation, the rate of inputs, raw materials, and services goes up. The cost of fuel (electricity, coal, petrol, diesel, oil, etc.) increases every year. Government service rates rise, and taxes also see an increase. Other direct and indirect expenses, such as salaries, wages, food, freight, cartage, communication, travel, rents, and duties, also increase. The organization must raise the prices of its products/services in consideration of all these increases. If an organization covers all other increases, why not also increase pay for its employees, who actually work hard to earn for the organization, their share of the increase?

Dear Sivakumar,

There are no fixed rules or norms for annual increments. Generally, it depends on the following:

1. The job market (What similar industries are paying).
2. The potential of employees you are hiring or retaining.
3. The capacity of your industry to pay.

As indicated by other colleagues, if you do not consider giving a fair raise, then the retention of employees will be difficult. Moreover, you may end up hiring employees for higher wages, which will be much higher than the increment you have offered. By hiring new employees at higher wages, you will upset the existing apple cart (existing loyal employees). So, it is an art of fixing the right scale of pay and retaining employees. You need to constantly update yourself on the market trends.

M.V.KANNAN

Dear Dibya,

We appreciate that you are new to the HR field and we welcome you to this forum.

My humble opinion is you can seek guidance but can't expect your fellow colleagues to work for you.

The guidance you require is as follows:

1. PF is computed at 12% on the Basic Salary. The contribution from the Employer side is 12% and is remitted to the EPF/FPS account, and another 12% from the Employee's side. However, if the employee wishes to contribute another 12% as Voluntary PF, he can make a request to the employer and have it recovered either as 12% or 24% (12 + 12) from the Employee's earnings for the month. There is a wage ceiling of Rs. 6500/-. In other words, for those employees drawing a salary above Rs. 6500/-, the employer can restrict the Employer contribution to 12% on Rs. 6500/-.

8.33% from the 12% contribution of the Employee's share is credited to the Employee's Pension account, and the rest is credited to the PF account.

2. ESI is computed at 1.75% on the Gross Salary, in your case Basic + HRA + TA, and is deducted from the employee's account. 4.75% of the Gross Salary is remitted by the employer. Please note that both the employer and employee contributions should always be rounded up to the next higher rupee. In other words, even if it is one paise above one rupee, it is considered as two rupees.

3. Gratuity is generally considered for the purpose of arriving at the Total Cost To Company. The calculation of Gratuity per month is arrived at as follows: Basic salary X 15/26 and divided this by 12 to give you the Gratuity contribution per month. But this amount need not be paid to the employee every month. It is paid only to those employees who have rendered a minimum of 5 years of service in your organization at the time of their leaving. The calculation is: Basic Salary X 15/26 X Nr. of years of completed service or part thereof in excess of 6 months. This means if the employee has put in more than 6 months of service, it is considered as one full year. For example, if the employee has put in 7 years and 8 months of service, the calculation will be for 8 years.

Regards,

M.V. KANNAN