Want To Know The Pros And Cons Of Performance Appraisal In January

Dear Seniors and CiteHR Members,

Happy New Year!

I need your suggestions. So far, we were conducting employee appraisals a year from their date of joining. Now, we are planning to align all the appraisals to one particular month of the year (January). I have already initiated the review process 8 months ago.

Two things that I am a bit stuck on are:

1. Calculating the increment percentage for employees whose appraisals have already been completed (although we planned to shift the cycle to January, we had already completed the increments for employees up to the month of August; increments from September onwards are pending).

For example: Employees whose increments were processed in August 2014 will receive an increment again in January 2015 (7 months earlier than the original appraisal cycle) - [there is a score and an increment slab associated with it].

For example: Employees whose increments were scheduled for September but were deferred to January. What will be their increment percentage?

2. Are there any tax implications now that employees have already made investments, and with the increment in January, will it impact their taxes?

Seniors, please assist me.

Thanks & Regards

Dear friend,

For the proper Performance Appraisal (PA), you need to have a proper Policy on Performance Appraisal. When employees join the company, during induction itself, they should be informed of when their appraisal will take place. The salient features of the policy could be as follows:

a) Appraisals may be conducted quarterly or half-yearly. A one-year appraisal cycle is too lengthy. However, salary increments may be implemented on the 1st of April or 1st of October.

b) For employees who join in between appraisal cycles, the timing of their first PA can be determined by the policy.

c) The percentage of salary increase should be tied to the PA score. The percentage slabs could be as follows:

- 91% and above
- 81% to 90.9%
- 71% to 80.9%
- 61% to 70.9%

The specific percentage for the hike cannot be determined at this point. It will depend on various factors such as market conditions, business performance, industry trends, etc.

By the way, do you have a comprehensive policy on the Performance Management System (PMS)? In today's age, you cannot simply rely on Performance Appraisal (PA). It is an outdated concept from the days of personnel management. For additional information, you may visit the following link: https://www.citehr.com/513953-reg-pe...-industry.html

Thanks,

Dinesh Divekar

Dear Dinesh,

Appreciate your prompt reply. My answers to your points:

a) Appraisal may be done quarterly or half-yearly. An appraisal cycle of one year is too long. Nevertheless, a salary hike may be done as of 1st April or 1st Oct. We have quarterly appraisals. It's the increment I am worried about.

b) Employees who join in between, when their first PA will take that can be decided in the policy. Can you give me an example, please?

c) The percentage of the salary hike should be linked to the score of the PA. The slabs could be as follows:

- 91% and above
- 81% to 90.9%
- 71% to 80.9%
- 61% to 70.9%

The slabs are exactly the same as mentioned by you. The hike in percentage cannot be decided as of now. It depends on several factors like market conditions, business done by the company, industry trend, etc. But, of course, the hike will be based on certain factors.

Let me reframe my query:

Mr. X is an employee with a salary of, say, 38000/- pm, whose last increment was in the month of August 2014. Based on the existing increment cycle, his next increment is due in August 2015. However, the management has now decided to move the increment cycle to January. In this case of Mr. X, say based on his ratings, he gets a hike of 7.5K pm, but since his increment cycle has been preponed by 7 months, there is an overlap, and here lies the challenge.

Thanks & Regards

Hello, I have faced a similar situation. The solution that arrived was as follows:

Here in this case for Mr. X, you can give the hike w.e.f. Jan 2015. As his hike is preponed for 7 months, he gets an additional amount of Rs. 52,500 when his hike is 7.5k. So, you deduct this additional Rs. 52,500 in 12 equal installments starting from Jan 2015, i.e., Rs. 4,375 per month, and he would get a salary of Rs. 41,125 from January till December instead of Rs. 38,000. (i.e., the amount which would have been received by Mr. X till August if there was no salary hike is Rs. 266,000 (38,000 * 7) and from August to December with a hike is Rs. 227,500 (45,500 * 5). That is, he would have received a total of Rs. 4,93,500 for the period Jan to December 2015 if the hike was in August 2015. So when his salary is Rs. 41,125 from January to December 2015, he receives the same amount of Rs. 4,93,500 for the year.

Hope this is clear. If I am wrong, please correct me.

Regards, Radhika