Employee Rejects Salary Raise: Can He Stick to Last Year's Pay Instead?

We have a peculiar situation where an employee has rejected the salary increment letter provided to him on the grounds that the percentage increment is very low. He is willing to continue on the same base salary he was earning the previous year. Please let us know if he can reject the letter and request the rollback process in the payroll.

Thanks,
RMN

Yes, he has the right to reject the increment. Meanwhile, try to convince him to accept it or persuade management for a higher increment. Is his performance good? I believe he might be looking for a change of job 

Thank you.

Jeevarathnam is right. There is absolutely no rule that the employee MUST accept what's being given. And, like Jeevarathnam mentioned, in all probability, he would begin to look elsewhere.

Analyzing the Situation

Looking at the situation from another angle, it's a sort of test for HR: figure out the actual reasons why such an increment was given ('actual' meaning apart from what's being given officially). While such cases of disparity between what an employee expects and what's given by the superior always exist in any organization, it must have been very high in this case for the employee to take such a tough and drastic stand of refusing.

Pre-empting Future Issues

Unless you do some digging of the causes/reasons for this situation NOW, even if you don't resolve this case (the worst-case scenario with the best-case scenario being you resolve this case too), you would at least be pre-empting future such cases when it could result in a crisis situation rather than a one-off kind.

All the best.

Regards,
TS

Some people might express their dissent out of frustration. Give it some time, and he will likely reconcile and accept the increment.

Regards,
Pon

I agree with all the members above. Employees have the full right to refuse the appraisal, and I completely agree with tajsateesh. This is where the HR process begins. HR needs to address issues like this because this is where conflicts between employees and the organization arise, potentially resulting in the organization losing a valuable employee or the employee harboring grievances that could lead to inefficiencies.

Thanks,
Axita

Understanding Employee Salary Increment Rejection

What logic is there in working at an even lower rate than what is being offered to him? This seems to be just a method of registering a protest.

According to me, a person cannot reject his increment. He has no option but to take the cheque processed by the payroll department. He may choose not to encash the cheque, but that will mean he will not get a salary. HR and the Payroll department are not bound to accept his request/rejection and roll back the figures in the software, etc.

HR's Role in Salary Increment Disputes

The real point in this is the reaction of HR to the matter. If the employee is critical and good, then it may be necessary to enhance the increment to the level wanted by the employee. If not, HR needs to explain how the increment is decided and show (if possible) that it was fair. If he does not agree, he can leave, and HR can find someone to replace him.

I think a polite request from the employee to reconsider his case would be acceptable, but rejecting the increment would amount to insubordination. The company has to look after many employees and salary structures. Not accepting the salary would disturb this structure, and also the ill will that the employee feels will show in his work performance, and this can have an adverse effect on his colleagues.

HR would have to look at the real reasons and the performance of the employee... else one should let them go. No one is bigger than the establishment. If an employee does not like the job, he/she cannot be an asset, and no one is forcing him to continue. If the increment is not accepted by the employee, he must submit his resignation and be relieved immediately.

This is an opinion, and I am not sure what the legal stand on this could be (labor laws, etc).

Hope you don't lose a good employee just because of a poor increment. Many employees get misguided and do not look at the bigger picture, and the loss is on both sides.

Hope good sense prevails.

All the best,

Regards,
Deej.

There are two categories of employees, namely workmen covered under the Industrial Disputes Act and those who are not workmen under the ID Act.

1. In the case of workmen covered under the ID Act, refer to any settlement in vogue or Standing Orders applicable.

2. In the case of employees who are not covered by the definition of the ID Act, the Indian Contract Act is applicable.

Employment is a contract. If the parties do not agree to the terms specified, they have the right to reject. Please remember, once the terms are rejected, the contract also ends.

Following Situations May Arise:

1. Employee does not sign the duplicate copy of the letter of increase (which is generally followed by well-organized companies). Wait for a few days, wait until you credit his salary on new terms. If he does not raise an objection except uttering a few sentences out of frustration, ignore it, and the new terms come into operation.

2. Employee gives it in writing that he is not accepting the new salary. Give a letter indicating that the contract of employment will cease as he is not accepting the revised terms and conditions of service. Mention in the letter that he can opt to get relieved immediately by paying Notice Pay or get himself relieved by serving the Notice Period. He surely will get back to you and either accept the new salary or opt to get relieved.

3. Employee returns the increased salary by a cheque. Normally, this does not happen; but if this happens, explain the legal position to him, wait for two or three days, and if he insists, encash the cheque and relieve him either by giving Notice Pay or by allowing him to complete the Notice Period. If he changes his stance during this period, accept and allow him to continue and if he does not accept, then relieve him.

I have read some postings here stating that the employee has a right to reject his increase. It is not a question of right but a question of contractual obligation. If either party decides to alter the terms and if one party does not agree to the revised terms, then the contract ceases.

I am not discussing workmen under the ID Act here as I presume the employee you are referring to does not come under the ID Act.

Thanks,

Sivasankaran

The decision on increments is made by the management. It is not up to anyone to refuse it. If a person does not want an increment, it may indicate that they wish to leave or want to demonstrate their importance to their HODs. However, in the interim, HR can include the increment in the person's monthly salary deposited in the bank. Ultimately, once the salary is deposited, it signifies that the person has accepted the increment.

Thank you.

You must speak to your employee and find out why he is rejecting the offer. You mentioned that the percentage increment is very low. How much was actually provided? Many managements consider themselves great, but both the Management and HR Department must set aside their egos. They should not favor worthless individuals while neglecting those who truly deserve support. It is likely that he rejected the offer due to this very reason.

With regards,
V. Subbarao
[Phone Number Removed For Privacy Reasons]

Compensation and Appraisal Process

As an interim measure, you can compensate with an inflation percentage, but you cannot call it a hike. It is similar to a DA revision matching the cost of living index. Regular appraisals are different; they need to be decent and transparent concerning performance attributes.

Many employers have started calling this type of (7% hike) compensation a PMS process. Matching the inflation for some and additionally giving a salary hike for others will result in a bloodbath. Any PMS evaluation process should have the employee's approval. Any meager hike will proportionately reduce deductions for PF/ESI/P-tax. If the net salary remains as low as the old figure, the employee can reject it, wait for the next hike, appeal, or look for better prospects. It's better not to give a low hike that reduces overall benefits.

Regards,
Chandru

We are in the same critical situation as RMN. Can higher management give an increment of 7% to one employee and 78% to another employee when both are working in the same role? It is important to note that this increment came after 2.5 years. The first employee is questioning the reason for this disparity. Does he have the right to ask or know the reasons for this? Additionally, this employee has given options to management:

1. Increase the salary to match the other employee's salary, or
2. He is ready to work at the same salary he was drawing earlier.

Kindly suggest?

I do not agree with one of the contributors that action can be initiated, and the employee can be asked to leave, and that it is a contractual obligation for him to accept the increment, etc. Legally, every enhancement or otherwise is altering the main term of the employment contract, which amounts to a fresh offer that may or may not be accepted. This does not mean that there is a breach of the original contract.

Terminating the services does not stand legal scrutiny, and the test, nor administrative action, would settle it. It would only open the floodgates!

The employee has every right to reject what is offered, and there are no legal compulsions against it. The action, if any contemplated, will open a can of worms about the Performance Management system of the organization and bias in the Appraisal system, if any. Apart from this, I do not think the organization can take such a decision without any recorded or documented reason that is objective enough to stand the legal scrutiny.

If the Performance Appraisal system is objective and transparent, and the employee deserves the kind of treatment, then the organization is well within its rights and can also make the reasons and bases known to the employee and even contemplate making it public so that it could be a point of standard to other employees!

Cases like this show that there is no proper and objective predetermined Performance Management System, and there are a lot of subjective considerations that call for greater introspection by the organization.

Even if the employee deserves the kind of treatment, there is an onus on the organization as far as empowerment and Competency Management, which perhaps have not been shouldered effectively.

Regards,
T.K. Vijay Kumar

I think, at the time of his joining, the employer had committed to an increment amount which should be implemented in the increment letter.

Understanding Employee Grievances Related to Salary Increments

There are a few things we need to understand when discussing this particular situation:

1. Was the increment linked to the performance appraisal process?
2. Was the appraisal process inclusive? i.e., did the employee appraise himself, and did he agree with the rating he received?
3. Did everyone with a similar rating get the same increment?

If the answers to all the above are "Yes," then it is basically a case of a generally disgruntled employee. If the answers to any or all of the above questions are "No," then the employee has every right to be dissatisfied, and he should have access to a grievance redressal process. Give him the opportunity to plead his case before a grievance redressal forum.

In any case, refusing to accept the changes to service terms is technically an indicator that the employee does not want to serve under the new service terms and hence can be asked to leave employment by resigning or by termination with full notice served or payment in lieu of notice.

The humane solution would be to speak to the concerned employee and get him to follow the correct grievance redressal process. Inform him that in the interim period pending redressal, you will pay him as per the new terms.

However, in case the employee refuses this solution, I think it is a case of the employee being disgruntled but at the same time being unwilling to take up his issues with the appropriate authority.

Regards,
Savio

Understanding Employee Concerns and Retention

Without good, dedicated employees, no organization will grow. First, speak to the employee and get their feedback. Kindly consider the employee's perspective. Due to official work, they may be facing problems in their personal life, which can lead to frustration or unnecessary pressure.

Most employees stick with one organization not only for salary; other factors are also important (e.g., stability, salary on the exact date, work atmosphere, etc.). Increments should be based on employee performance or the inflation rate. How the increment process is carried out should be checked for any signs of partiality.

Common Employee Issues

Employees may have problems with:
1. Work timings
2. Work pressure
3. Unequal remuneration
4. Continuous work without leave
5. Unstable job security
6. Years of service and importance
7. Recognition and refreshment activities
8. Career improvement programs
9. Work atmosphere

Regards,
JAAK

According to my opinion, there is no rule that mandates accepting a salary increment. However, employees should try to convince management by explaining their problems, needs, capabilities, and performance.

Regards,
Veeresh

I would not really agree with a lot of people here. I think an employee has all the rights to talk about his appraisal, and if he is not happy with the increment, he can have a direct one-on-one discussion with his manager and HR, where he has to prove himself right for rejecting the appraisal.

What if he is already underpaid, and the employer has given a minimal standard hike? What if he has all the data to prove his work and KPIs are met for the year? In most scenarios, we would not encounter cases where an employee has rejected the increment given to him. However, if we do come across such situations, we should go back and check if he actually has the data to show his work for the year and if all the KPIs were met. In that case, we are, of course, answerable.

Regards,
Nidhi

Dear Nidhi,

Two Key Issues: Legality and Humane Considerations

There are two issues:

1. The legality and his rights.
2. The humane side of this issue.

I responded only from a legal aspect. I still hold the view that if an employee refuses (and if he is not a workman under the ID Act), the Indian Contract Act is applicable. I am very sure that a change in salary is a change in the terms, and if he does not accept, the contract ceases.

From the humane side of it, there have been a lot of postings here. We can talk to him, try to convince him, and so on and so forth. But, allowing a person to say no to his increment and trying to pacify him will indicate that your appraisal system is not strong. If your appraisal system is strong, why worry? Tell him if he wants to continue he can; otherwise, he can make a decision.

I am also aware that some HR Executives criticize their own Appraisal System and say, "we have a hopeless appraisal system." If he has made any such comment, then he cannot talk to this employee assertively.

As HR people, we need to communicate the Company's policies in no uncertain terms to the employees.

Suggested Appraisal Process

I would imagine a process like this would have been followed in this case:

1. Call for annual appraisal from concerned managers.
2. Reviewed by HODs.
3. Appraisal perused and submitted to a committee or the CEO.
4. He or the committee would have applied their mind.
5. Final decision taken.

Few are unhappy always, and generally, if the feedback has been good across, why bother about one employee.

We must get on to our business rather than worrying too much about one employee unless it is proved that some injustice has been done to him.

Regards,
Sivasankaran

Yes, an employee can reject his or her salary increment if dissatisfied with the increase. This dissatisfaction may stem from various reasons, such as a desire for a different amount or some personal issue with their senior.

Handling Refusal of Salary or Increment Letter

Refusal to accept either the salary or increment letter, or both, reflects a protest as well as misconduct amounting to insubordination and can be dealt with accordingly if HR finds that the increment in question is well justified. In any case, HR has to counsel him on all the pros and cons of the case, and if he sticks to his guns, disciplinary action, as per rules, would be warranted.

Regards,
S.K. Johri

Understanding Employment Contracts and Salary Increments

I have served in HR with Zamil Group in the Middle East, where millions of Indians, Filipinos, Pakistanis, etc., are hired on contract, not "indefinite employment."

1st question: Have you seen the employment letter of the said employee?

2nd question: Let's assume a hypothetical case for your understanding. An employee is hired on specific benefits. To make it easier for you, let's take it as a 1-year renewable contract (normally workers are engaged on 2-6 year contracts). At the end of the year, the company may or may not offer a raise. If both parties do not renew the contract, the employee returns to their home country.

Now let's take the second case, where the person is working on a 2-6 year contract. The salary may or may not be increased, and the worker will continue working until one of the parties exclusively opts out of the contract.

Let's take a scenario on retainership now in the Indian context. We engage a person on X benefits, and let's say we foresee the relationship to last for 2 years. There is no compulsion to hike fees after a year unless we have specified conditions. Mere wishful thinking or cost of living indexation doesn't suffice. If at any point one party feels the contract is unfair, they can opt out (exit clauses can be specified, including notice period, etc).

Addressing the Original Question

Why should an employee be asked to leave if he doesn't find the hike acceptable?

Understanding Employment Contracts and Salary Increments

I have served in HR with Zamil Group in the Middle East, where millions of Indians, Filipinos, Pakistanis, etc., are hired on contract, not "indefinite employment."

Key Questions to Consider

First question: Have you seen the employment letter of the said employee?

Second question: Let's assume a hypothetical case for your understanding. An employee is hired on specific benefits. To make it easier for you, let's take it as a 1-year renewable contract (normally workers are engaged on 2-6 year contracts). At the end of the year, the company may or may not offer a raise. If both parties do not renew the contract, the employee returns to the home country.

Now let's take the second case, where the person is working on a 2-6 year contract. Salary may or may not be increased, and the worker will continue working until one of the parties exclusively opts out of the contract.

Retainership Scenario in India

Let's take a scenario on retainership now in the Indian context. We engage a person on X benefits, and let's say we foresee the relationship to last for 2 years. There is no compulsion to hike fees after a year unless we have specified conditions (mere wishful thinking or cost of living indexation doesn't suffice). If at any point one party feels the contract is unfair, they can opt out (exit clauses can be specified, including notice period, etc).

Addressing the Original Question

Now let's address the original question: Why should an employee be asked to leave if he doesn't find the hike acceptable?

Mr. Rana,

I never said the employee must be asked to quit. The question was a legal one. The person raised the question as to whether an employee can reject the increase. I am visualizing a typical Indian situation. Generally, letters are issued for permanent employment and not on 2-year or 5-year contracts. Let us talk about such a situation.

There is no obligation on the part of the employer to raise the salary unless there is a timescale specified or a clause indicating that there will be a revision every six months or every year. Generally, there are two types of increases in the Indian context (I am not talking about the unionized category here): General revision to cope with market conditions and performance review and increase thereafter. The latest trend is to combine both and make adjustments every year.

My only argument is when an organization issues a letter revising the salary, it amounts to a change in contractual terms (similar to what you are referring to in the Middle East where the contracts are one year). When an employee rejects the revised conditions, he rejects the offer. In my opinion, when one party to the contract rejects an offer, the contract ceases (it is not only my opinion; it is just a simple legal position).

Examining Employee Behavior

Thereafter, we need to examine the facts through behavior:

1. Employee rejects the increase but keeps silent when the new salary is credited to his account.
2. Employee rejects the increase and also returns the money given to him to the company.

In the former situation, we can deduce that the employee expressed his grievance but has accepted the revised terms by accepting the revised salary. In the latter, it is an indication that he has rejected the revised terms completely. If he has rejected the terms, can he continue? You yourself have mentioned that in the Middle East if the revised terms are not acceptable, the employee returns. Just because there is no mention about years, it does not mean there is no such contract in the Indian context.

As regards seeing the appointment letter, we just give our advice and opinions based on the facts given here. If we need to give our final legal opinion, then we need to examine all the documents. This forum is not meant for free legal consultation. This is a forum to express our views. It is for the person concerned to take it or not to take it.

Thanks for reading my views and expressing your views.

Regards,
Sivasankaran

This has nothing to do with outstanding performance in studies. Here is the question of providing an amicable and practical solution which can be offered on the basis of experience and maturity. By this, I do not want to cast any aspersion on my friend, but what I have said is a statement of fact.

It is once again reiterated that refusal to accept the salary along with the increment constitutes misconduct for which the employee concerned should be prepared to face. In case of a grievance, as it seems to be, the valid course of action would be to follow the prescribed procedure for the purpose, and in case of there being no procedure, he should take up the case with the authorities concerned.

Regards,
S.K. Johri

Mr. Johri,

You made a statement, "This has nothing to do with outstanding performance in studies."

Answer: Please look all around yourself. Everywhere, people are running after scores, courses, colleges, companies, salaries, titles, and so on...

Options for Addressing Salary Concerns

Option no 1: As Mr. Johri says...

Option no 2: In a leading firm, an employee is referred for an employee assistance program.

Option no 3: In a leading firm, wherein merit increase doesn't match the Cost of Living indexation, an employee needs training to enhance performance.

Option no 4: In a small concern, the CEO or HOD intervenes and gives a higher increase. It can be on the record, and it can be off the record.

Option no 5: In the case of a blue-collar worker, where jobs are easy to find, it will lead to immediate attrition.

Option no 6: In the case of a blue-collar worker, if the same is detected by a social compliance auditor or buyer, it will lead to a serious issue of deeper examination of practices within the company, possibly leading to the cancellation of orders or dismissal of staff.

Option no 7: In the case of a blue-collar worker wherein the skillset is not easily replaceable, a higher increase may be sanctioned.

Option no 8: In the case of an employee with a long innings, ethical conduct, and superlative performance, even if an employee is non-promotable, he will be paid "1-2 levels" higher than the salary specified for the band. This is not an exception. This is a normal practice.

Check the "headers" in the inputs required for Hay salary survey... it checks for the number of years.

Option no 9: Continuation of 8, the organization creates a new position to justify a higher salary though after job evaluation, there is little difference in scores/job content.

The above list is simply a starter. There are scores of possible situations/answers.

I do not think this makes sense. A refusal of an employee to accept an increment is misconduct and an insult to the management. There are better ways to address the matter. He can always go to HR and say he expects more (larger companies have grievance cells in HR), or in a smaller company, he can go to the director/owner and say he needs to be paid more.

No social auditor or buyer is going to cancel an order of a company because some employee wants a higher salary. As long as the salary is above minimum wages, the social auditor or buyer cannot object to the company's decision on pay scales.

Whether the person needs to be removed immediately or tolerated/accommodated is a simple function of how critical his skill sets are to the company's short-term survival. In the long term, such an employee needs to be removed necessarily.

Regardless of whether people are running after money, title, etc., the conduct of this particular employee is unacceptable to any self-respecting management.

I have had such cases in the past where I felt I was not getting a fair increment. I went and told the director that I deserve more, this is industry standards, and if you are not giving me what I deserve, I will look for a job elsewhere. But no one but a fool or exceedingly arrogant will reject his increment.

Irrespective of who the employee in question is, it could have been you too, my dear friend. Be assured that you would have been in safe hands, as I would have never followed your philosophy: "A refusal of an employee to accept an increment is misconduct and an insult to the management." To me, it simply means that one individual needs my attention.

I hope you have not mentioned a percentage increase per year in his appointment letter. Increments are decided based on the performance of the employee. If your organization has a Performance Management System (PMS), then he would have received feedback on his performance, which would have determined the raise he was awarded. Moreover, an employee always has the right not to accept everything given by the management. You can discuss with him what he was expecting and why he did not receive the raise he anticipated; feedback is crucial in such cases. Money has always been a significant motivator for most individuals, so handling the situation carefully is essential. Take steps to ensure that these issues do not arise in the future.

Playing a Bridging Role

Playing a bridging role in this case is important. He will be contacted by consultants in the coming days. Please ensure you find candidates for his replacement.

Regards,
Sachin

Can anybody please help me in preparing a refusal letter to the employer for the annual increment? I have already resigned from the company, but the management had a discussion with me, and they also assured me that they will promote me next year. I do not want to accept the proposal. Please help me in preparing a letter for the same.

Regards