Is Comparing Salaries Necessary for Every Increment? Seeking Advice on Our Process

Dear All, I need urgent guidance from the seniors. In the organization I am working in, we have a very lengthy increment procedure. We give a 7% inflation amount to all employees at the time of increment. Secondly, we compare the salaries of people with the same designations and give a "Correction Amount" to equate the salaries. This is a very lengthy procedure to present to management every time for approvals.

Performance Rating and Salary Comparison

Thirdly comes the performance rating. My query is - is it necessary to compare salaries each time an increment is given? Salary is offered based on the last salary drawn; someone's last salary may be 10K, and someone's may be 13K, for example. Then, there may be some situations where some employees are hired by offering a higher salary, while some employees may be excellent and thus offered a high salary to join the company.

Kindly guide, should this practice of comparing salaries be continued?

Thanks & Regards.

Hi,

It is not necessary to compare the salaries of people when considering increments as this could result in a situation where individuals with higher skills are paid the same as those with lower skills. Therefore, increments should be based on the last drawn salary of each worker, taking into account their merit or performance without directly comparing amounts.

This practice can also lead to an improvement in your workers' performance, satisfaction, and level of involvement.

With Regards,

Mr. Thumbs Up

Dear Alpana,

Can I know how you equate the salaries of employees and which mode you are using to compare it with the market trend?

Thank you, Mr. Thumbs Up.

@Sneha, we compare the salaries of employees in the same cadre within our organization. Based on performance ratings and differences in salaries, we aim to align the salaries of individuals within the same cadre. This task is a herculean effort carried out using Excel spreadsheets. Importantly, this process is not influenced by market trends.

Dear Alpna,

First of all, don't compare the salaries of employees who are in the same cadre because salary may vary based on the skills of the employee and their performance. Increments should be based on the performance appraisal score.

The effectiveness of your appraisal systems brings in transparency and also avoids creating bias.

Thank you.

Purpose of the Appraisal System

The purpose of the appraisal system is to differentiate talents on a scale of results delivered against the results expected from the profile. When you compare the salary of two employees who may be in the same cadre but might have different levels of accountability/deliverables, it creates a contradiction to the effectiveness of your appraisal system.

Also, note that Salary Fitment is a tool that should only be used in special cases.

Regards,
Shivang

Precisely, my opinion is that there is no necessity to compare one’s salary with another's. Everyone received their present salary (pre-revised) based on various parameters, which have ultimately provided the base for different salaries for those employees, despite the fact that they are all in the same cadre. Disparity is bound to be there, which no one can help or equate on board.

However, if your company policy states that everyone should be given a 7% increase irrespective of their past, everyone will have their increased salary after the raise, but the variations would still exist. It’s not your purpose to bring everyone on par, I presume, but if you want to maintain the disparity or variances commensurate with their past performances in line with your rating/grading system, you have to readjust their revised salary in such a way as to reflect the advantages resulting from the appraised grading.

At the same time, a comparison with various permutations and combinations on a selective basis may be necessary to rule out undeserved employees not getting undue advantage due to arithmetic. I hope comparison does not lead to complications. In other words, the right people should have the right fixation.