How Should We Handle a Resignation After Announcing a Salary Hike? Seeking Advice from HR Peers

Hi Seniors, I am working as an HR in a small company. We recently announced a hike of 35% to one of the employees who has been working for two years. We stated that this hike would be applicable from August 2012 onwards. However, the employee has decided to resign due to some personal issues and submitted his resignation on 1st August. We have a two-month notice period, and the management has decided not to provide the hike to the resigning employee as per their earlier decision. The management has asked me to make a decision on this matter.

Please guide me.

Thanks & regards,
Sravya

Company Policy on Increment for Resigned Employees

It is company policy. It is quite normal to put on hold the increment for the resigned employees. Again, it depends on the circumstances, and one should analyze the reasons for their resignation. If the employee is leaving the company solely for monetary reasons, the decision to withhold the increment may be made. If the employee is resigning due to genuine personal reasons, considering the increment with a human touch may be appropriate. It is at the discretion of management.

Regards,
Pon

In most organizations, increments are put on hold if an employee resigns or is serving notice. However, as Pon has mentioned, as a goodwill gesture, it can be given in exceptional circumstances (long-term service, good relations with management, good performance, etc.).

Evaluating Financial Implications

As a company, you will have to pay out two months' incremental salary with no benefit in return. Evaluate how much it comes to and whether the organization wants to bear this financial burden. You can always say it's company policy to withhold increments for resignees and end the story.

I do not know why management has decided to put a hold on his 30% salary hike. Sravya, please analyze the reason and convey the same to management to make an informed decision. You are there to take necessary actions for your staff.

I believe that you should release the resigned employee effective August 1, 2012. The employer can waive the notice period, and since the employee has terminated the employment contract, they cannot demand salary for that period.

This topic was discussed earlier in CiteHR quite a few times—here's the link to one of them: https://www.citehr.com/340976-increm...signation.html. You can use the research facility at the top of this page to see more threads on this topic.

I think the core essence of a salary hike is 'performance' (both in terms of job-related work and attitudinal issues) for a particular period of time—not whether the employee is close to the management or not.

For the issue under consideration, the hike is being given with effect from 1st August 2012 for the performance of the past year—during which he was very much present (and I presume performed very well, else a 35% hike wouldn't be considered).

Coming to the reasons that many employees give—'personal reasons'—let's not be naive. Unless an employee is able to share the reasons (at least partially, if not fully) at least in confidence with his/her boss and/or peers (if not with HR), one can safely assume that it's for another job. Fortunately or unfortunately, this is one reason that's highly used and misused often.

If someone really has personal reasons, his/her most likely response ought to be to ask for leave—maybe for a long duration. Would you resign when you have a personal reason and things to handle on priority on the personal front—in the process adding to whatever stress you are undergoing? Please give this a thought.

At the end of the day, like Pon mentioned, it's the 'discretion of management'—which again depends on what 'their' perceptions/views of 'people management' are.

All the best.

Regards,
TS

An increment or a pay hike has a purpose, i.e., to motivate the employee to continue their valuable contribution to the growth and prosperity of the organization. In this case, the above purpose is not served, which leads the employer to deny the benefit. The management is right in its decision. The management can exercise its discretion if it decides to provide the pay hike during the notice period. Please agree that the approach differs between the public sector/government and the private sector (you are positioned in the latter).

Regards,
S.K. Johri