How Should We Handle Salary Increases for Long-Term Employees Without Promotions?

Employee Increment Concerns

I would like your expert advice and guidance on an employee increment-related matter in my company. We have certain people in some departments who have been with the company for a long time (5+ years, 10+ years, etc.) and they are at the same level at which they joined the company. Some of them are workers like Warehouse Helpers and Production Coordinators, and some of them are staff like Accounts Executives and Graphic Designers. Every year, we give them an increment on their salaries within the range of 10-15%. Due to their long tenure in the company, their salaries, especially those of the workers, have increased significantly. Because of their high experience in our company, they possess all the technicalities involved and have good functional industrial knowledge.

For example, we have an unskilled Warehouse Helper who joined at a salary of 3k and is now drawing a current salary of 15k, whereas in the market, if he seeks another job, he will get half of this.

Questions on Salary Cap and Increment Justification

My question here is, can we fix a limit on how much their salaries can be increased and how? Similarly, for the staff category, in case a person is not growing vertically, can't assume more responsibilities or get promoted but is executing the job well, is an increment justified for him/her? Can we put a cap on the maximum salary for a level beyond which increments can be stopped?

I am looking forward to your valuable comments.

Regards,
Garima
Mumbai

Seeking Guidance on Employee Increment Decisions

Wow! No replies? It's increment time, seniors. I would appreciate your comments and guidance to make the right decision.

Regards,

Your company is a classic case that illustrates what happens when HR fails to plan the careers of employees. Instead of capping their increments, create a promotion avenue for them. Has your company not nurtured them? Is it their fault?

For this year, provide them with the usual increment. However, sit down with each long-serving employee. Identify their strengths and weaknesses, and determine where they can be placed at a higher level. Enroll them in training courses.

Career Planning

"Career Planning" used to be a part of good old personnel management. However, the issue with modern HR is that they do not like to be referred to as Personnel Managers, yet they do not fully embrace the role of HR Managers. Situations like these arise due to inadequately trained HR professionals.

Another challenge you will face is that these employees have become experts in their current roles after years of doing the same job while receiving increments. They may now be resistant to change. Changing their mindset could be quite challenging. If an employee does not wish to grow, tough actions must be taken. For those individuals, it is acceptable to halt their increments. Inform them now that if they resist growing within the company, they will not receive a salary increment next year.

In a well-known transport company, it is rumored that employees are not kept in the same designation for more than five years. They are either promoted or, if deemed unsuitable for a higher position, asked to resign.

Earlier, there was a discussion about promoting the office boy to a higher level. I provided my comments on that post. Click the following link to view the reply, especially the last paragraph:

#post1840325

Best regards,

Dinesh V Divekar

It is a piquant situation that the HR manager, who is very keen on granting some hike in the salary of certain lower-rung people positively because of their long and sincere services, is a little bit reluctant. This reluctance may stem from their personal incompetency to move up vertically or simply because the employees are stuck in their current roles.

In manufacturing industries like textiles, where wage hikes for workers are typically linked to their collective productivity, a distinction is made between seniors and juniors by introducing the component of service-weightage. Certain roles by nature offer no opportunities for career or personality development to the employees holding them. However, these roles and the employees are indispensable to the organization.

Therefore, it is suggested to motivate them by granting periodic increments without imposing a cap. This approach can help them maintain their efficiency in their current roles and their loyalty to the organization. If cost-consciousness is a concern, one alternative could be to wait until their normal retirement and then consider outsourcing the roles if necessary.

Thank you for your attention to this matter.

Best regards

Thank you, Mr. Divekar, for your response. HR has been recent in my company, just around 3-4 years old. Prior to that, for the past 25 years, we have been working traditionally. But now the company is growing and expanding.

Challenges in Career Planning

Career planning is a good option, but the ones I am talking about are unable to move up the ladder; we have tried it a few times. They lack the ability and attitude to move on to the next level. As you rightly said, a few of them have become change-resistant, and also due to their long years of association with the company and personal relations with the management, they think they are indispensable. So now we also have started getting attitude issues from their end. They don't want to adhere to the processes or policies set. We don’t wish to terminate them due to the loyalty they have shown over the years. Cost is not the main problem, but the issue we face is of salary imbalances amongst that department due to the old and new staff.

Garima

In addition to what Mr. Dinesh has suggested, and given the fact that resistance to change by these employees is visible, I think you can also try the following:

1. Set a salary cap for each of the dead-end jobs/roles levels effective the next performance review cycle.
2. Do away with annual increments.
3. Bring in a differential incentive package based on achieving specific performance criteria.

If you have buy-in from the leadership, you could develop a suitable career path for each of such roles. This will provide an opportunity for growth and lateral movement (an assessment development center could be helpful).

Thank you.

Regards,
Shashidhar

Our subsequent information is that they are reluctant to grow vertically despite the opportunities provided to them. It is true that granting increments merely on the basis of length of service may result in situations where a warehouse helper with 25 years of service but without any sense of accountability and responsibility may be earning Rs. 40,000/- per month, not to speak of the protection under labor laws, whereas a Warehouse Manager with 8 years of service may be drawing Rs. 25,000/- per month but shouldering huge responsibilities for pilferage, wastes, or damage and risking his job for such lapses, and that too without any law providing any cover to him. This anomalous situation may be demotivating to the employees in the managerial cadre. Therefore, I have the following suggestions to deal with the issue.

Suggestions to Address Increment Issues

1. Whenever granting increments are linked to the length of service, it is advisable to fix a stagnation stage at some point in service beyond which an employee does not earn any increment. To justify such a stagnation stage and in order to make employees not feel that the management is practicing unfair labor restraints, the employee concerned shall be offered an opportunity to sit for a promotion test to elevate himself to the next higher position and to shoulder higher responsibility so that they need not stagnate but earn increments again in such a higher position.

2. The message that goes through such a process is that if an employee does not sit for a promotion exercise to be conducted by the management, then he will be considered to opt for stagnation in his current post and pay, of his own volition. This may encourage or even force many lower cadre employees to opt for higher responsibilities.

3. Mostly an employee spending 15 years of service in a company may also be acquiring skills in functional areas other than their own. For example, an accounts executive might have acquired skills in an administrative job or a graphic designer might have acquired skills in other areas of software applications. These skills are called transferable skills. Explore the possibilities whether these transferable skills can be utilized in other departments so that they do not stagnate.

Regards,

B. Saikumar
HR & Labour Law Advisor
Mumbai

My suggestion is as follows:

1. Change is always resisted because when systems change, we fear loss. If one fine day I come to you and tell you, "Garima, tomorrow onwards we are having so and so changes in the rules," you too would resist it and think that I am being unfair. So the best option for now is if your appraisal period is near, continue the age-old process for the current year as it won't be fruitful bringing in change in such a short duration.

2. Try to educate and communicate to your staff (both blue-collared as well as white-collared) that you are bringing in a policy that would really help them grow, and for that, you need their suggestions.

It is my view that when you ask your people their opinion and suggestions to tackle a problem, they feel privileged and important. Additionally, it becomes positively communicated that you are in the process of bringing in change.

Tell them that the company wants to be fair in doing the appraisal process rather than just giving the same or similar hike to all. If you are performing better than someone else, you fall in a better performance level than others, you should be recognized in an exceptional way.

Ask them how their performance can be tracked. Perhaps, you may get a couple of ideas for your implementation. And if nothing else, as I said earlier, you are making it clear that things and processes are on the verge of change.

3. Try to find out in other firms in the same industry how they track performance and carry out the appraisal process. It would again give you an idea regarding what is to be done. Take all ideas, note them down, and try to figure out which one will work the best for you.

I hope this should help. 

Solution to Employee Increment Anomalies

The best solution to this uneasy problem is the one suggested by Mr. Dinesh. However, I observed from your subsequent information that they are reluctant to grow vertically despite the opportunities provided to them. It is true that granting increments merely on the basis of length of service may result in situations where a warehouse helper with 25 years of service but without any speck of accountability and responsibility may be earning Rs. 40,000 per month, not to speak of the protection under labor laws, whereas a Warehouse Manager with 8 years of service may be drawing Rs. 25,000 per month but shouldering huge responsibilities for pilferage or waste or damage and risking his job for such lapses, and that too without any law providing any cover to him. This anomalous situation may be demotivating to the employees in the managerial cadre. Therefore, I have the following suggestions to deal with the issue.

Regards,
B. Saikumar

I am sorry to say, but I have a different opinion. I think management is responsible for the present mess: "HR has been recent in my company just around 3-4 years old. Prior to that, for the past 25 years, we have been working traditionally."

Now the company is looking for a quick-fix solution: "But now the company is growing and expanding."

As they say, "Rome was not built in a day." It is not possible to change the situation overnight, however hard one may try. "Wow... No replies??? It's Increment time Seniors; would appreciate your comments and guidance to make a correct decision."

Under the circumstances, it is best to adhere to the suggestion given by Mr. Dinesh Divekar, as paraphrased below:

"Now for this year, give them an increment as usual. However, sit down with each long-serving employee. Chalk out the strengths and weaknesses of each one and find out where he/she can be placed at a higher level. Send them for the training courses.

"Career Planning" was a part of good old personnel management. Now, today the trouble with modern HR is that they do not like to be called Personnel Managers, but neither do they become fully HR Managers. Situations of this kind arise because of half-baked HRs.

Now you will face one more challenge. They have become experts in their existing job because they have been doing it for years together. Whereas they were getting their increments too. Now they could be change-resistant. Changing their attitude would be quite difficult. If someone does not wish to grow, then you need to take tough action against that person. For such persons, nothing wrong if you stop the increment. Tell them now that if they refuse to grow in the company, then in the next year they will not be given any salary increment."

For the future, the advice of Mr. B. SaiKumar holds good.

At the same time, I think the Company and HR too should shed their negative attitude and treat the employees with a long tenure with more respect. People talk very highly of Loyalty but fail to respect it when they see it before them.

The attitude problem seems to be more from the management side: "So now we also have started getting attitude issues from their end. They don't want to adhere to process or policies set. We don't wish to terminate them..."

Also, instead of having a condescending attitude, fake patronizing outlook about the employees who have become highly skilled in their jobs over the years, one should at least be aware of the job market trends or at least the Minimum Wages for a Highly Skilled Warehouse operator/Supervisor.

Just keeping them stagnating as Warehouse Helper - although admitting that they know all the technicalities involved and possess good functional industrial knowledge - over so many years and not admitting to their skills or changing their designations and giving them suitable promotions; all these speak about the mindset of the Management in general and HR in particular, which is amply illustrated in the following sentences:

"Due to high experience in our company, they know all the technicalities involved and possess good functional industrial knowledge.

For example, we have an unskilled Warehouse helper who joined at a Salary of 3k drawing a current Salary of 15k, whereas in the market, if he seeks another job, he will get half of this."

On one hand, the person is called an "Unskilled Warehouse Helper," while on the other hand, admitting his skills and knowledge, and also how his salary has grown. Also, one would do well to consult the Minimum Wages of the state to understand that the salary of such a person would be more than 7.5 K as erroneously thought by the management and HR alike.

Hope the realities do not sound too harsh; even if they do, but it is best to accept the harsh realities and do some soul-searching to understand if the problem is not self-created.

The solutions have already been offered by our in-house HR experts!!

Warm regards.