Understanding Minimum Increment Percentages in Pune and Chennai: How Are They Calculated?

Hi all,

I wanted to understand how the minimum increment percentage for a place like Pune & Chennai for a year is calculated. Somebody told me it's economic growth plus the inflation rate in general. Can someone help me understand this further?

Understanding Minimum Wage and Increment Calculation

If I am not wrong, economic growth and inflation are considered in the minimum wages part, whereas the annual increment is basically based on the paying capacity of the employer, which depends on the bottom line, i.e., profits (organizational performance). Once the first criteria are met, the increments will be based on the individual, department, and unit performance.

Defining Performance Slabs

As HR professionals, we need to define performance slabs such as high performer (A+), very good performer (A), good performer (B), fair performer (C), and poor performer (Z). Then, determine the percentage of the amount you are going to pay. For example, A+ = 30%, A = 20%, B = 15%, C = 8%, and Z = Nil.

Furthermore, employees who receive an A+ rating for two years continuously will get promoted to the next higher grade in the second year, etc. Conversely, employees rated Z twice are liable for demotion or termination.

I hope this clarifies things.

Regards,
Kameswararao

Thank you, Kameswararao. It makes sense that economic growth and inflation are considered in minimum wages. Please confirm my understanding. For example, suppose the minimum wage of 2017 is 15,000. Considering economic growth at 7.2% and inflation at 4.4% as of Jan 2018, the minimum wage for 2018 may be calculated as a 7.2% + 4.4% = 11.6% increase to 15,000.

I have learned that in Chennai, they are planning for a 10% to 12% increment, which is a general percentage considering the market. How is this percentage arrived at? Is there a science behind determining this?

Understanding Minimum Wage and Increment Differences

Please don't mix the minimum wage and increment parts as they are different. The minimum wage is set by the government at the state level, taking into consideration the cost of living index. All organizations, including factories, shops, and establishments, must comply with these regulations. As an HR professional or part of the organization, you do not have control over minimum wages. Additionally, minimum wages vary based on categories such as managers, salesmen, clerks, security guards, as well as industries like Chemical & Pharma, Cinema, Electronic Industry, Motor Transport, Hotels & Restaurants. Moreover, the minimum wage may differ based on the location, such as Metro or suburban areas.

Frequency of Minimum Wage Changes

Another critical point to note is that changes in minimum wages (+ or -) occur on a half-yearly basis, from April to September and October to March.

Increments and Their Determinants

Regarding increments, they are given on an annual basis and are entirely based on the performance of the organization, unit, department, and individuals. When deciding on increments, management considers economic growth, the cost of living, the scenario in similar industries, and the profits earned by the organization.

I hope this clarifies things.

Thanks and regards,
Kameswararao

The increment is given to compensate and balance the loss suffered due to inflation. Comparing the price index (what was the index during the last increment and what is the present index rate), there would definitely be either an increase or decrease trend. Mostly, there is an increasing trend compared to a decreasing trend.

The percentage of increase to be added to the salary as an increment. If the employer provides something extra where business growth is good.