Employees are an integral part of any organization and their contribution is crucial for the success of the entity. To ensure that employees remain engaged towards their work, employers must provide them with fair compensation.

As an employee, you may have noticed a drastic change in your skills and performance levels over the years. Consequently, your responsibilities and day-to-day workload got increased as well. To acknowledge your contribution and keep you motivated, the organization may increase your monthly salary, also known as a salary hike, pay raise or increment.

In India, most organizations offer yearly increments to their workforce. However, the actual amount may vary depending on multiple factors. In this blog, we have listed the factors that decide increments and how you can calculate the hike percentage with an example. Also, we have listed out the reasons why organizations provide salary hikes. Let us start with the reasons first.

Salary Hike Percentage Calculator

Why Do Employers Provide Salary Hikes to Employees?

Employers provide increments based on a variety of reasons that depend on the organization and the industry they operate in. Getting familiar with these reasons will help you understand how an employer thinks about salary hikes. Here are some common reasons for the increment:

1. Maintain a Positive Work Culture

Fostering a positive workplace culture and ensuring employee job satisfaction is essential for any organization. Offering increments can be one way for managers to acknowledge employees who respect ethical values and believe in hardworking. However, providing only an increment will not be enough. Employers should also use a comprehensive approach to motivate employees by offering growth opportunities, open communication and work-life balance.

2. Encourages Other Employees to Work Better

Employees who have managerial skills and understand what motivates their peers are likely to become the next generation of supervisors or be rewarded with other managerial positions. So, if their employer provides increments, then the company can easily retain top talent. Moreover, other employees such as interns and new recruits will also be motivated to give their best performance.

3. Help Employees Become Proactive

Employers know that if they set a criterion for salary increment, each employee will try to boost their skills and knowledge. They will also work proactively, and as a result, it will motivate other teammates and help maintain a productivity standard at the workplace.

5 Important Factors Employers Consider Before Deciding Salary Hike

Now that we have understood the reasons why employers provide increments, it’s time to go through the selection criteria they keep in mind before picking the right employees. (Note: The actual amount of the hike can be decided on a fixed value or a percentage of the employee’s current salaries)

1. Company Budget

If your company wants to acknowledge every hard-working employee but has a lack of capital, they can spend the capital wisely by allowing increments to a limited number of employees. In that case, you will have to give your best performance and maintain excellent professional behavior. This will draw the employer’s attention, and increase your chances of getting an increment.

2. The Experience Level of the Employee

Any new employee who has completed a proper training period may qualify for the increment. Additionally, employers will prioritize experienced employees for a raise, especially those who help new recruits with training or provide guidance to other colleagues.

3. Qualification and Expertise

One of the crucial factors employers may consider is an individual’s qualifications. An employee with more education or training regarding the job role can be considered a good candidate for a hike.

4. Average Pay Standards

Considering yearly increments, employers may do some research about the average salary standards in similar roles in the industry. In order to keep up with the current trends, most organizations will pay a good salary to their employees.

5. Performance

Employee performance is considered the most important criterion for salary increments. Employers reward those employees who exceed performance expectations. It shows that the organization values their excellent performers and provides recognition for their efforts. Most organizations use a performance tracking solution to track each of their employee’s performance throughout their employment duration. The managers then identify good performers and appreciate them with a raise.

How to Calculate Salary Hike Percentage

If you have recently got a salary hike, but do not know the amount or the percentage of the increment. No need to worry, you can effortlessly determine the actual increment percentage with three simple steps:

1. Be Familiar with Your Old and New Wages

To calculate your increment, first, you must know your old salary amount and the one after the increment. (to get an accurate calculation, keep both amounts on either a monthly or annual basis)

2. Make the Calculations of Salary Increment

Subtract the new salary from the previous one to determine the raise in pay. You will find the difference between both the previous and current salaries.

3. Find the Percentage of the Increment

To find the actual increment rate percentage, multiply the hike amount (the difference between the new and previous salary) by 100 and then divide it by the previous salary.