Salary Hike Procedures Under Factories Act: What Documents Should I Keep?

Dear HR professionals,

My company operates under the Factories Act. Last month, we provided a 10% salary increase to all employees for their appraisals. Are there specific procedures for granting a salary hike? Do I need to maintain any documents as proof of the salary increase given? Please provide clarification.

Thanks,
Nagarjun

Dear Nagarjun,

The method of salary hike that you have adopted in your company dates back to the 19th century or the early 20th century. Alas, you could have entered the 21st century!

Performance Management System (PMS)

If you wish to give a salary hike based on performance, then what you need to do is devise a sound Performance Management System (PMS). The primary objective is to capture the performance of each employee accurately. To do this, you need to measure performance scientifically and create performance slabs. Later, communicate these measures to the employees and inform them when their performance will be assessed. Afterward, assess the performance and determine which slab the employee fits into. Then, based on the company's financial performance, you may allocate a percentage increase to each slab.

Uses of Performance Measures

Performance measures are not only for salary hikes but are also used for recruitment, employee training, career advancement, etc. I have been providing responses on subjects related to PMS for years. Click the following link to refer to my reply in the past post:

https://www.citehr.com/563388-re-abo...ml#post2306729

In one of my posts, I have uploaded the Sample KPI and KRA Manual. You may refer to the following link to download it:

https://www.citehr.com/520630-samle-...-download.html

Thanks,

Dinesh Divekar

Dear Nagarjun, one more point that I missed in my previous post: By giving a standard increase of 10% to everybody, you have placed average performers and star performers on equal footing. Will this not demotivate the high performers? If employees' performance is not appropriately rewarded, why would employees go the extra mile? They will work only to the extent of protecting their employment. This, in turn, will foster mediocrity, which will hinder the growth of the organization.

When employees are suitably rewarded, it increases their self-esteem, and they start valuing their organization. In contrast, when inefficient employees are rewarded, they enjoy at the expense of the hard-working employees. By giving an equal salary hike to everybody, you have created a situation where those who need to be removed could stay, and those who need to be appreciated for their extraordinary performance might quit.

As stated earlier, the sooner you get rid of this 19th-century management style, the better!

Thanks,

Dinesh Divekar