How Should We Handle Wage Increments for Long-Serving Employees? Seeking Your Advice

Respected sirs,

It is increment time in our company, which occurs once every three years for operators. We have some very senior operators who have dedicated 25 years of service to the company, standing by during tough times. Others have contributed between 10 to 14 years of service. Now, my question is, if a wage is decided, should it be equal for all?

The most senior employee is currently earning 50k, while the junior most is earning 44k. Please suggest what you think is appropriate. Your insights will be greatly appreciated. Please guide me.

Thank you.

What is the existing increment policy?

The company can give higher increments to people who have shown higher measured productivity. The amount can be directly linked with the achievement of goals.

Seniority-based pay systems

Seniority-based pay systems are those in which the primary basis for pay increases is the employee’s tenure. It should be noted that seniority-based pay systems can take into account performance, but the main factor is tenure. Some benefits of seniority-based pay include loyalty, retention, and stability of all staff members, regardless of performance levels.

Performance-based pay systems

Performance-based pay systems consider performance as the primary basis for pay increases. Like in seniority-based pay systems, other factors, like tenure, can be accounted for in a performance-based system, but employee performance, as decided by the organization, is the main impetus in determining pay raises. Keeping this in mind, the organization can decide on the increment policy.

In order to compensate long-serving employees better, considering the fact that the difference in emoluments is only around Rs. 6000 between an employee with 15 years of service and a newcomer, it is suggested that you may follow an increment on a % of basic pay basis. For instance, if you follow 3%, it will be Rs. 1500 for senior employees and Rs. 1320 for the newly appointed ones. The % of increment could be decided based on the industry's capacity to pay.

The management decides a certain percentage to be given as an increment. This increment is calculated based on grade/basic pay, and the increment amount will be different, but the percentage is equal for all.

If you want to give something more to someone whom you consider to have made a greater contribution to building the company's business, you can do so, but not at the time of the increment as this may create problems. Instead, you can felicitate them with a one-time cash incentive for their 25 years of dedicated service to the company.