Employee Resignation After a Raise: Should We Revoke the Salary Increase?

Hello everyone,

Please let me know what policy should be in place in case an employee decides to leave the organization or resign immediately after receiving an increment. Should we have to revoke the salary increase or not?

Hi,

Appraisal increment is for the past performance period under review. Hence, we are not supposed to revoke it when an employee leaves the company. However, nowadays, most companies are adding a clause in the appraisal letter stating that "in case of resignation within ___ months from the effective date of the increment, Management reserves its right to revoke your increment."

If you have added the clause, you may revoke it, but without anything in writing, if you do, you will need to face questions.

Hi Sandhya,

Greetings!

Based on my legal knowledge, we cannot withhold payment solely due to separation unless there is a legal dispute. Simply mentioning it on paper does not hold up in a court of law. If a payment has already been credited to the bank account, we cannot request it back; however, if it is only in the form of an increment letter, then it may be possible.

I recommend developing a comprehensive retention framework in alignment with the organization's strategy.

Dear Sandhya, please note the following:

Employee retention in SMEs

a) Employee retention is always a challenge in Small and Medium Enterprises (SMEs). Everybody wants to work in a branded company. If not branded, then it has to be at least a sufficiently "big" company.

b) To grow their business, employers ride on the back of the employees. Conversely, to grow their career, employees ride on the back of the employers.

Survey insights from naukri.com

c) As far as the survey by naukri.com is concerned, they say that in the months of July and August, there is a surge in the activation of naukri accounts. In fact, many vacancies are filled from August till December. This is common across all industries.

Appraisal and job search dynamics

d) Employees wait for the appraisal because they wait for the receipt of the new salary slip. With 2-3 salary slips in hand, they search for a new job. This helps them to bargain more with a prospective employer.

Revoking increments

e) Revoking an increment is ridiculous. I cannot comment on the legal validity of this move, but if you tell employees to refund the increment amount, then what motivation is left for the employees?

f) What if you make a policy on taking back the increment and still the challenge of employee attrition remains? You will be back to square one.

Making employment attractive

g) The challenge is how to make employment attractive. Attractiveness does not depend solely on remuneration. You need to find out other avenues as well.

Reasons for employee resignation

h) When employees decide to quit, they always look for a better hike. But the decision to quit is not necessarily because of poor remuneration. It can be because of other factors like poor leadership, lack of empowerment, lack of team spirit among team members, etc.

To retain manpower, try improving team spirit among employees. Another important point is to improve the interpersonal environment. These two factors predominantly shape the culture of the company.

Thanks,

Dinesh Divekar

Dear colleagues,

No doubt, the increment is given for performance in the preceding year. However, when someone resigns immediately after receiving an increment, it shows a very unethical and deliberate intention to pocket the increment and quit. In my view, the aspect of retention strategy is pushed into the background given the dubious intention on the part of the employee.

After the increment, the employer has a reasonable expectation for the employee to continue contributing. But if the employee takes the company for a ride like this, I do not believe it is wrong for the employer to revoke the increment.

Regards,
Vinayak Nagarkar
HR Consultant

Firstly, find the cause of resignation. Then talk to the employee about what the employer can offer to retain them. If both parties agree, it's a win-win situation for everyone.