What do you Mean by Appraisal, Salary Hike and Salary Revision?
Meaning Of Appraisal, Salary Hike And Salary Revision
This article is a detailed report highlighting the key differences related to salary hike, performance appraisals and salary revision.
As an employee, when you are desperately waiting for a hike in your salary and eagerly visit the HR manager of your company, to know about the percentage hike; you perhaps feel that you have been asked to solve the toughest puzzle in the world, when the manager tells you to wait for an appraisal before the salary hike. Don't worry! There are many who remain similarly confused in such situations. It is because, although these two terms have very different meanings; many tend to use them interchangeably.
Appraisals Vs Salary Hike :
Salary hike or increment is always a good news; however, that is not always true for appraisals. So when your boss has planned an appraisal for you; roll up your sleeves and get to work, if you desire a salary hike. Still confused ?..
Well, in a layman's language, salary hike is something that usually comes to you by virtue of the number of years spent in the company. Most companies have a 6 months increment procedure, while some extend it to a year as well.
Salary hike is important because it encourages employees to just keep going. It helps to rejuvenate the lost interest after several years of monotonous work life. Companies usually maintain the same amount of percentage hike for employees working in the same profile. As for example, at the end of a year when the company decides to make a 4 percent salary hike for all employees working in the finance department, every employee receives a 4 percent hike on their base salary. This does not necessarily mean that their net salaries will correspond to the same amount.
On the other hand, appraisals are a review of your performance in the company for a specific duration of time. Appraisals usually lead to salary hike unless one has committed some extraordinary blunders at work. Sometimes, appraisals may lead to some bonus or reward in place of increments. However, in the rarest of cases, appraisals result to salary decrement. Another face of appraisals includes the potential appraisals. This type of review is not based on your day to day performance in the company; rather it is based on miscellaneous skills of an individual that are in no way related to the current job profile. These appraisals are based on an individual's leadership qualities, communication skills etc. that qualify them for future job roles. This is conducted by companies to find the usability of employees in other job roles.
The primary aim of appraisals is to encourage employees to perform better in future so as to have a probable salary hike. Appraisals also provide a scope for employees to discuss strengths and weaknesses with supervisors. The employers on the other hand get an opportunity to ascertain organizational goals and how every employee can work to achieve common goals.
How does the appraisal system function?
Appraisals are also used to make other vital decisions regarding transfers or change of job profiles. They are also used to inform employees about disciplinarian standards etc. Many companies maintain an appraisal system whereby they provide complete information about the duration after which appraisals will be conducted for employees. It also provides the factors that will be considered for appraisals and the expected performance level. This is a good practice as it gives all employees equal scope to prepare themselves for positive appraisals; thereby enhancing their performance, that is the main objective of this process.
After an employer carefully evaluates the performance of workers, it is important that a detailed report is provided to employees, informing them about the areas where they excelled as well as the areas where they can improve. It is best if the employer provides some guidelines that can be followed to improve performance.
It is very important that employers remain very honest and unbiased while delivering appraisal reports of employees. There have been several cases where employees were not satisfied with their appraisal reports resulting to legal issues between the employee and the organization.
Salary Revision :
Salary structure comprises of various components depending on company norms. However, there are some components common to all salary structures. These components include basic pay, PF and gratuity. House rent , special allowance, medical and travel allowances are also very common components of a company's salary structure. Salary revision is the process of modification of entire salary structure including all primary components. This is where it differs from salary hike in which an increment can be related to only one component of the entire salary structure. In simple words, 12 percent salary revision implies to 12% increase of all components of salary mentioned above. Whereas, 12% salary increment relates to 12% hike in any one component; usually the basic pay. As mentioned earlier, salary revision is the modification of all components of salary structure that may also ultimately lead to no percentage increase in the net salary.
Salary revision is done under several conditions. When the current pay structure of any company does not match the labor - wage structure of the market, the company has to undergo quick market catch – up revision. This protects the workers from getting under paid as compared to market trends. Probation policies of companies need to include the probation revision policies as well; that provides a certain amount of increment on the salary structure after the employee successfully completes the probation period within the stipulated time. Promotion revisions are also used to decide the new salary structure of employees after a promotion.
Companies usually study the pay scale patterns of similar job profiles in the market and carefully design the salary structure of employees. Sometimes a huge CTC may not lead to productive increments in future. Now, what is a CTC ? These are the huge numerical digits that appear in our employment or salary slip that don't turn into annual take home. . Hence, it is essential that the employees have a clear idea about their salary structure.
This was all about the three different parameters related to employee's salary. Hope it will help you to decide your line of action each time you come across a salary hike, performance appraisal or salary revision.