Should I Pay Full Salary to a New Hire on Probation or Adjust It Differently?

Hello Friends, I have one question for you. If I hired a new employee with a CTC of 5 Lacs per annum, I am offering him a monthly salary of approximately 38,000 after deductions.

Salary During Probation

My question is: should I give him his full salary even though he is on probation? If not, how can I differentiate the salary between probationary employees and confirmed employees?

Thanks,
Munali

Have a confirmation bonus component in your salary that is given only to confirmed employees. That should solve your problem, and it is a very good model to have.

It need not be a percentage but a monthly figure. For example, if the salary of a person on probation is 15K, after confirmation, this figure becomes 17K. That way, confirmation also creates financial excitement.

When hiring a candidate initially, you provide a certain amount as their CTC. It doesn't look good if you withhold any amount.

Budgeting Manpower Costs

One solution could be to budget the manpower cost accordingly during the hiring process. For example, you could offer a CTC that is 10% lower initially. After confirmation and based on the candidate's performance, you can then consider increasing the CTC on a percentage basis.

I hope this suggestion helps you. If you have any queries, please feel free to reply.

Regards,
Poonam

Making a difference in the salary is not logical because CTC components or break percentages are the same across all levels of employees in an organization. The difference you can make is that confirmed employees are eligible for privilege leaves, whereas new joiners or those on probation are not. After their confirmation, the privilege leaves are credited to their account on a pro-rata basis.

Munali, you can only make a difference in the perks, not in the salary/CTC.

Regards,
Shikha

As per CTC, you have to ensure that you verify the salary details from the previous company before offering the salary. After six months, you can offer him/her a CTC of 5 lakhs.

I am not in agreement with you because it is morally wrong to offer a lower salary initially with the promise of an increase after confirmation. For me, it's better to include all calculations in the offered CTC. Thanks for your suggestion.

Regards,
Munali

What do you mean by "perk only"? If either way you give an increment, it is directly related to salary/CTC.

There seem to be two parallel tracks running here. Let's segregate and look at the fundamentals:

What is CTC?

The name itself signifies what it means: Cost to the Company. Here is a simple example to explain CTC more simply.

The CTC of a person is, say, 12 L per annum. This means 12 L will include his monthly, annual, and all his bonuses/incentives.

Now, as a company, I can give him:

1. 50 K per month and 6 L at the end of the year.
2. 20 K for the first 3 months, 40 K for the next 6 months, 60 K for the following 3 months, and 7.2 L at the end of the year.
3. ...and so on.

The point is, there are no set rules that say you cannot increase a salary every month/quarter/period. So, you can have different salary packages within a single financial year.

One industry that does this is the IT industry, where performance appraisals are done every 6 months in some companies, and increments are given.

An increase in salary upon confirmation is quite a normal trend in a lot of smaller companies.

How/What Should You Increase in the Salary Structure

Typically, the basic and all components connected to the basic (like the HRA) are not tampered with unless there is a grade change, which could be annually or more than that. What is played around with are allowances (and you can give it any name that you want).

Cheers!!!

Regards,
Navneet

The concept of probation and confirmation needs to be clear to deal with your predicament. An employee under probation is kept under observation to determine whether they are suitable to be part of the company for a long-term service relationship. Such a distinction is a long-followed and recognized practice in employment. Thus, the service law, practice, and custom undoubtedly keep a confirmed employee on a pedestal higher than the employee under probation. Therefore, the company should make the distinction manifest in various respects. For example, a probationer may not be considered eligible for certain financial assistance like a vehicle loan or housing loan, or certain perks like a telephone reimbursement facility. If it is so, how can a distinction in salary during probation and confirmation be discriminatory? The company is well within its rights to award increments or bonuses upon confirmation, as some members suggested. I think the members have come up with some practical solutions to overcome your problem.

Regards,
B. Saikumar
HR & Labor Law Consultant
Chipinbiz Consultancy Pvt. Ltd
Mumbai
[Phone Number Removed For Privacy Reasons]

In my view, the salary should be the same in both cases. Probation means a mutual understanding between the employee and employer.

Regards.

As far as my knowledge is concerned, the salary variance between the above two does not make any difference. A probationer means a person provisionally selected to fill up the regular post for a specific period. So, if the performance of such a probationer is found satisfactory, his service could be confirmed on the regular rolls; otherwise, his service should be discharged at the expiry of the fixed period of probation. However, the salary structure and other benefits for probationers should also be on par with the regular employees of the company.

This policy may vary from company to company and state to state depending on their recruitment policy. Even the probationer should be paid PF, ESI, Bonus, Leaves, etc.

Regards