Can We Legally Replace Salary Increments with Bonuses? How to Retain Our Developers?

I am working as an HR professional in an IT company in Gujarat which has 7 developers. The directors say that we do not want to give increments to them and just bonus in place of that. Is that possible legally? How do I retain employees if this is imposed, and new hiring will be a big problem? Kindly guide.

The company will not be an attractive place to work. Attrition rates will be higher than normal, and employees may not be engaged as needed for the company to do well. While I am unaware of any legal provision that mandates increments on a yearly basis, the fact that their financial plan does not include planned increments will be a significant negative factor. Giving a bonus is poor consolation. The amount of the bonus can vary from time to time. It will not be in the hands of HR to do anything to retain employees. Your own position may be shaky in case the firm runs into tough financial conditions.

The Importance of Employee Retention

There is a lot of change which is inevitable. Retaining an employee is the first and foremost priority of any organization. When an organization fails to retain its human resources, the organization never fulfills the dream of achieving its existence.

Bonus vs. Increment

A bonus is an extraordinary motivation for an employee for his/her achievements during the working/serving period, whereas an increment is the tonic given to boost the morale of an individual employee with the hope that his/her salary is being revised/enhanced every year in line with the rising monetary inflation of the market. The raise/enhancement may vary from industry to industry, and the decision of the board squarely rests on inefficient performance/administration. The rest follows without dignity.

Best of luck.

Thank you so much for your guidance.

The management says they are okay with employees resigning. I am clueless about how I will hire new employees if this system is imposed.

Thanks again.

Understanding Industrial Relations and Wage Fixation

The management seems to be unaware of industrial relations concepts, which include the necessity of an increase in wages, increments, and dearness allowances as recognized by the Apex Court in the Hindustan Times Ltd case and the Hindustan Lever Ltd case of 1994, along with subsequent cases. Since the developers may be covered as workmen, any developer or workman of the company may raise an industrial dispute for the proper fixation of wages, and then the management will have to change its attitude. Fair wages cannot be denied to any employee.

Let the HR department give a gradual discourse to a person in deep slumber. Otherwise, he will become a victim of these types of situations when attrition is very high.

Thanks,

Sushil

Attrition Stopping

There is one method if your management agrees to increase salary but the increment amount is given after six months if the employee stays with the organization. This method is very effective in providing an increment as well as stopping attrition. Of course, your organization should be able to support the increment after six months to pay the sum.

Now, it is clear that the organization did not go for salary enhancement; let it be as it is. You need to convince the management to merge a portion of the bonus with the salary and view it as an increment (by dividing equally). The provided bonus should be high; if it is meager, you may certainly face an awkward situation. In the absence of a bonus ratio, it is certainly difficult to say.

Anyhow, you have to find a way out. Otherwise, you are not the one to face the drum; the organization is. Because you are also a part of the employee. You may choose to make a decision as you wish in your way.

Thank you.

Dear Umalme,

The question is not about attrition problems. Making employees understand that they will receive a bonus once a year instead of an increment is likely to create numerous issues within the company. The management seems oblivious to the potential consequences of their proposal.

After reviewing the Bonus Act, I now realize that the amount of the bonus could pose a significant issue, especially considering the financial constraints the company is facing, which have led to the emergence of these unconventional ideas.