How Do You Draft an Annual Increment Letter with a Bonus or Project Incentive?

Hello everybody!

Kindly help me in drafting an annual increment letter which includes a one-time bonus given to an employee or an incentive given to complete a project.

Regards,
Aanchal

Hi Aanchal,

The annual increment letters vary from organization to organization. It doesn't have any fixed format. The most common format is:

Dear ........
................
................
................
The management is pleased to inform you that your salary has been revised w.e.f. .......... Your increased salary w.e.f. ....... stands as per the break-up given below: You can mention the break-up as per the revised structure. If the bonus/incentive is included in the CTC, you can mention it in the break-up. Otherwise, you can write below the break-up, "Apart from the above-mentioned, you will be entitled to a bonus/incentive, which will be.................... (the way it is to be calculated)."

The management looks forward to your continued good performance & support. Wishing you & your family a great year ahead.
..................
..................
..................
..................

Hope this will help you in a small way.

Regards,
Amit Singh

Hey Amit,

Could we also link this bonus/incentive with an employee's conduct and discipline in the office? What do you say and how could we link it?

Cheers,
Aanchal

Hi Aanchal,

Sorry I couldn't reply to you before as I just saw your post. You can't link a bonus or incentive to an individual's conduct and discipline as the bonus is statutory and should be given to everyone equally (a fixed percentage of their basic salary which may vary). As far as incentives are concerned, they are normally target-oriented, depending on the achievement of targets. Regarding the conduct and discipline at the workplace, the effect of it can be implemented by including it in the behavioral aspect of performance appraisal.

Hope I have helped you in a small way.

Regards,
Amit

Date:

Mr. [Last Name],

[Company Address]

Dear Mr. [Last Name],

Management has truly recognized your potential for growth within the company and has therefore entrusted you with additional responsibilities, with high expectations. Take this as a challenge and demonstrate your capabilities.

In light of the above, Management has also decided to award you a Special Performance Reward of Rs. [Amount]/- per month, effective from 01.08.2006. This will be in addition to your current Total Cash to Company (TCTC).

As you are well aware, the business landscape is increasingly competitive, necessitating continuous efforts to reduce costs and enhance production capacity. It is imperative that you and your team focus on improving raw material yield, minimizing wastage, and consistently elevating the quality of our products and services.

We have full confidence that you will dedicate yourself to your duties with even greater efficiency, acting in the best interests of the organization, and living up to the repeated trust and faith vested in you by the Management.

All other terms and conditions outlined in your Appointment Letter will remain unchanged.

Yours sincerely,

For [Company Name],

Authorised Signatory

Date: [Insert Date]

Mr. [Insert Recipient's Name]
[Recipient's Position]
[Company Name]
[Company Address]

Dear Mr. [Recipient's Last Name],

Based on the business results, your performance for the year 2005-2006 has been found ABOVE EXPECTATION. While conveying our appreciation for your performance during the year in review, we are confident that you will continue to put in adequate efforts to further improve this performance level.

Considering the above, the Management is pleased to promote you to Assistant Manager with immediate effect and increase your Total Cost to Company (TCTC) by Rs. [Amount]/- per month effective from 1st September 2006 as an increment for the year 2005-2006. In addition to the above, the management is also pleased to grant you a Special Performance Reward of Rs. [Amount]/- per month effective from 1st October 2006. With these two increases, your gross emoluments have risen from Rs. [Previous Amount]/- to Rs. [New Amount]/- per month TCTC. Complete details of your TCTC are provided in Annexure - A enclosed herewith.

The next review of your performance will be conducted, preferably on 01.09.2007, subject to the conditions deemed conducive by the management.

We trust that you will continue to exert your best efforts in fulfilling your responsibilities more effectively and in the best interest of the organization, thereby living up to the confidence placed in you by the management.

Please accept our warmest congratulations.

Best regards,

Yours faithfully,

For [Company Name],

[Authorised Signatory]

Dear Mr. Management,

Management is pleased to grant you an annual increment, raising your basic pay from Rs. 4500 to Rs. 5000 per month with effect from 1.06.2007. Other terms and conditions of your service remain the same.

For Indian ----- Ltd,
Authorized Signatory

Increment Letter:

Date: ___________

[Mr./Ms. _________]
[Co.]
Branch- [_________]

Dear Mr./Ms. _________,

The Company is pleased to inform you that your base salary has been revised to Rs. _________. w.e.f. _________. The detailed Pay Structure is annexed as a part of this letter. (Annexure I (II))

All the other terms and conditions of your appointment remain unchanged. We appreciate the efforts put in by you and expect that you would continue to do so in the future.

Yours sincerely,
For XYZ [P] Ltd.
Authorized signatory
[Name]
[Designation]

Encl.: Annexure: - Terms & Conditions (Annexure I (II))

Enclosure:-
1. Your annual compensation package consists of a gross of Rs. ____________/- Salary (Rupees ___________________ only.) per annum. Your annual Salary Breakup is as follows:- Basic: Rs. _______/-, HRA: Rs. __________/-, Medical: Rs. ________/-, Conveyance: Rs. _________/- (Annexure II), with effect from the date of your joining. Income Tax/Professional Tax will be deducted each month according to the Income Tax rules as/if applicable. Each employee will be expected to take care of his/her tax planning on an individual basis. Rs. ____________/annum is your fixed salary. (From Annexure I, Terms and Conditions of Employment).

Please understand that this letter spells out some of the terms and conditions of employment and that the other service rules of the company, as currently in force and as amended from time to time, will be applicable to you.

I have read, understood, and agree to abide by the aforesaid terms and conditions of employment.

Signature of the employee: Date:
[Name]
[Designation]

Below is a sample of an increment letter with variable pay declaration and covering letter.

Warm Regards,

Suhasini