How Do Organizations Handle Salary Increments Amid Inflation? Seeking HR Insights

I have a query about the increment policy of organizations. I am working in an organization (NGO) where inflation is not considered during increments. Increments are based solely on the performance that the person has shown during the past year.

Increment Policies in Organizations

I wanted to ask all HR professionals about what is practiced across the sector. Is inflation part of the increment, or is the increment given after accounting for inflation?

Kindly help me by sharing your views and experiences.

Thank you.

The general practice followed is to consider inflation also while considering the annual increments, especially for people who are not covered by dearness allowance.

Thank you, KSHASHIKUMAR NAIR. I appreciate your inputs.

Are there any legal obligations if the said system is not followed?

Hello Viaswajit,

I don't know about NGO increment practices. Industry practices of basic salary scales and numerous allowances constituting total CTC (Cost to Company) have an inbuilt shield for inflation. Progressive organizations do consider the inflation element in granting annual increments where there is no separate DA. Except under the Minimum Wages Act, there is no law requiring the employer to pay any allowance related to inflation.

It depends on the company and its standards, regardless of the state of the economy.

Please let me know if you need further assistance.

Dear Vishvajeet,

There are no legal obligations if the system is not followed; however, this will help HR to deal with employees when the question of the cost of living arises after the increments are announced.