Is There a Law on Annual Salary Increments? Seeking Guidance on Evaluating Performance

Dear All Seniors,

I am working in an MNC as an HR Lead. I want to know if there is any law or act regarding annual salary increments for employees. If such legislation exists, please inform me. If there is no specific law, how can I evaluate their performance for increments? Your assistance is appreciated.

Thank you,

Himangsu Das

There is no law on this. It is the prerogative of the management to decide on the salary to be given and increments, as long as the salary is higher than the minimum wages.

Along with all the above-mentioned suggestions, make it clear to all employees that salary hikes are not mandatory after appraisals. An appraisal process indirectly manages employees' performance. Hikes or increments in salary are directly related to the team's and project's performance, as well as the account, business unit, and profit, along with individual performance during the appraisal period, which includes all the management objectives and KRAs.

Since you are working with an MNC, they will have a specified formula to calculate and measure the hikes, along with a predefined performance management system. You may need to consult with your seniors regarding the implementation of performance appraisals.

Regards,

As an HR professional, my suggestion is that before delving into the performance appraisal system, it is crucial to align our human resources with the mission, vision, and direction of the company. Define Key Result Areas (KRAs) for each individual and establish goals/targets accordingly to contribute to the company's growth. Please note that performance appraisal does not guarantee a salary increment or hike. It is solely based on an employee's work performance and the KRAs defined by the company, as well as the contribution made to the company's growth.

Thank you.
Regards

Understanding Annual Increments

There is no labor enactment for annual increments. Every organization conducts this exercise according to their own performance appraisal policy, annual increment policy, or compensation hike policy. The awarding of annual increments varies from company to company based on the size of employees.

As an HR lead, you need to outline a policy that best fits your organization. Develop a detailed policy and implement it accordingly. It is suggested that annual increments be linked to employees' job performance to involve colleagues from different departments in the process of the performance appraisal system.

Thanks,

R K Nair

Your query: "I am working in an MNC as an HR Lead. I want to know if there is any type of law or act for the increment of salary every year for the employees. If there is anything, please let me know. Even if there is no act or law, how can I evaluate their performance appraisal for an increment? Please help."

Position: Except for the Minimum Wages Act, the Payment of Wages Act, and the judicial pronouncements in cases of denial of propriety, justice, and fairness that touch upon the issue/subject of increment in wage or salary, there exists, as of today, no law or act on the subject.

Fixing wages/salary for employed persons is the employer's prerogative, exercised only by the employers/managements. At times, employers/management are, on their volition, open to negotiation with workers' representative trade unions or such other lawful bodies considering the organization's sustainability.

Regarding granting increments, it is advisable for employers/managements to remain transparent, ethical, impartial, fair to the people, and true to the cause (sake of more profits/profitability/ROIs).

You may adopt a scheme suitable for your business sustainability while concurrently promoting the wellbeing of all stakeholders.

Regards,
Kritarth Advisory Team

Annual Salary Increment and Performance Evaluation

Regarding the increment of salary every year, the question is addressed at the time of appointment. You should have a clear statement in the appointment order indicating the annual increment based on performance or salary enhancement. This resolves the question.

All other criteria such as motivation, promotion, pay fixation, and work performance are interrelated. The efficiency and performance in alignment with the tasks undertaken above the standard pay increment are the most beneficial. Employees develop themselves in line with organizational progress.

Therefore, the minimum wage/salary increment is explicitly stated in the appointment itself. This reiterates the minimum wage/salary increment.

Attached Increment Policy Sample

Please find attached the thread with a PDF sample of the Increment Policy:
- [Increment Policy PDF Sample](http://www.lboro.com/media/wwwlboroacuk/content/humanresources/downloads/increment.pdf)
- [Google Search for Increment Policy](https://www.google.com/#q=Increment+Policy)

Regards

Increment and Decrement Policies in Organizations

As per the law, increments are applicable for worker grades, which we know as the revision of minimum wages every six months in all industries.

For staff, the increment will depend on performance and internal company policy. Nowadays, we see incentive policies established in many organizations to boost morale.

To the best of my knowledge, there is something in the law applicable to decrements. If there is a decrease in any circumstances, can any employee take legal action or not? Please advise your views.

Thanks & Regards,

Keshav

Recruitment Manager

Tejomay Services