How Can We Fairly Calculate Performance-Based Salary Hikes for Our IT Team?

Working in an IT firm in Kerala with a staff strength of 30. We have decided on a salary hike for employees this December, but it will be purely based on performance. Would be great if anyone can help with this. Please share if there is any tool or software that we can use to calculate the annual increment effectively.

Steps to Implement Performance-Based Salary Hikes

• **Point No. 1:** Please ask your management for the overall budget for salary hikes, meaning how much we can go up to.

• **Point No. 2:** Please assess your employees' rank using various methods. Accordingly, if an employee gets 10 points, he/she will be eligible for a 20% salary hike. If an employee gets 8 points, he/she will be eligible for an 18% salary hike, and so on.

• **Point No. 3:** Finally, prepare the calculation sheet and present it to your management.

If you have any queries, please contact me at [Phone Number Removed For Privacy Reasons] or email me at [Email Removed For Privacy Reasons].

Regards,

Working in an IT firm in Kerala, with a staff of 30. We have decided on a salary hike for employees this December, but it will be purely based on performance. Would be great if anyone can help with this. Please share if there is any tool/software that we can use to calculate the annual increment effectively.

Steps to Implement Performance-Based Salary Hike

Point No: 1 Please ask your management for the overall budget for the salary hike, meaning how much we can go up to.

Point No: 2 Please assess your employees' rank using various methods and accordingly:
- If an employee gets 10 points, he/she will be eligible for a 20% hike of his/her salary.
- If an employee gets 8 points, he/she will be eligible for an 18% hike of his/her salary. ... etc.

Point No: 3 Finally, prepare the calculation sheet and present it to your management.

If you have any queries, please contact me at [Phone Number Removed For Privacy Reasons].

Steps to Enhance Performance Appraisals

If you have a budget, follow this method to improve performance appraisals:

1. Self-assessment of the employee - provide a questionnaire that is important for work delivery.
2. Reporting Manager assessment of the employee.
3. HR assessment of the employee.

Based on these three cumulative assessments, give a true increment instead of just a flat fixed percentage of the slab. Every individual will receive their own performance level increment, not a comparison within a slab.

Thank you.

Regards,

Steps to Enhance Performance Appraisals

If you have a budget, follow this method to step up the performance appraisals:

1. Self-assessment of the employee - provide a questionnaire important for work delivery.
2. Reporting Manager assessment of the employee.
3. HR assessment of the employee.
4. Management verification of justification that would add value even if not required.

Based on the three cumulative assessments, give a true increment instead of just a flat fixed percentage of a slab. Every individual will receive their own performance level increment, not a comparison in a slab.

Thank you.

Regards,

You have to work on two parallel systems of:

1. Performance Assessment
2. Salary and Rewards

And then link them together.

Performance Assessment

In Performance Assessment, you need to rate people based on performance and establish the distribution.

For example, if your performance rating system has a 5-point scale (for the sake of example, let us assume that 1 is the worst performer and 5 is the best performer), then establish how many get ratings of 1, 2, 3, 4, and 5.

Once you do that, work on the Salary and Rewards systems starts.

Salary and Rewards

Get clarity from your seniors on how much rupee budget you have to give as increments. In other words, if your existing payroll cost is a hundred, then what is your budget to take it up to? 115, 118, or 120? In percentage terms, it would mean 15%, 18%, or 20%.

Suppose they say that you have a 15% budget on existing salaries, then prepare a plan on the distribution based on the actual dispersion.

Do some mathematics to establish how much increment employees with rating 1 would get and likewise. In this example, employees with rating 5 should get the highest increment and 1 gets the least.

In Salary and Rewards, we also look at inflation percentage and decide whether inflation becomes your minimum increment point.

Hopefully, this would have helped you. If you need more details, please drop in an email to [Email Removed For Privacy Reasons]. I would be happy to help!

All the best!

Regards,
Rajesh