Salary Increment: The thing that every working person waits for the most at the end of the year is salary increment. It is not just about money, but it is also a recognition of hard work and motivation. But have you ever wondered how this increment is decided and how it is calculated?
Understand salary increment in easy language
Salary increment means increase in your annual income. This increase is based on your hard work and performance and is mostly stated in percentage. Sometimes this increment also plays a big role in your next job change because the new company also pays attention to the previous increase.
How is the increment decided?
Increment does not depend only on performance appraisal. Yes, whether you have completed your annual targets, key performance indicators (KPIs), key responsible areas (KRAs) or not, and how your rating was, are important factors. But apart from these, many other things are also important, such as:
- The status of the industry you are working in (e.g. IT, Banking, Healthcare).
- Financial condition and profitability of the company.
- Your department’s budget.
- How many years have you been in the job, your qualifications and the specialty of the role.
How to calculate salary increment?
Now comes the real question, how is the increment calculated? There are three common ways of doing this.
1. When the new salary is announced
Suppose your old salary was ₹ 50,000 and now the company has increased it to ₹ 60,000. The formula is:
(New salary–Old salary)÷ Old salary × 100
= (60,000 – 50,000) ÷ 50,000 × 100 = 20% increment
2. When only the increment amount is mentioned
If the company said you will get a hike of ₹ 10,000 and your old salary was ₹ 50,000, then the formula will be:
