The most special moment of the year for every employee is waiting for the increment. It is not just about increasing the money, but it is like a recognition of your hard work and a new inspiration. But have you ever wondered how this increment is decided and how it is calculated? Apart from your performance, there are many other factors that affect your increment. Understanding this whole process is very important for your career.
How is the increment decided
The increase in salary does not depend only on your performance appraisal. It is true that how much you have accomplished your targets, Key Performance Indicators (KPIs), and Key Responsible Areas (KRAs), these things matter the most. But apart from these, there are some other things which are taken into consideration.
What is the overall condition of the sector you are working in, such as IT, banking, or healthcare? If the company has made good profits, then the employees are more likely to get a better increment. There is a fixed increment budget for every department. Your total job experience, your education, and the specialty of your role also play a part in this decision.
How to calculate salary increment
Now, let’s come to the most important question of how to calculate the increment. There are three easy ways to do this:
When the new salary is announced
Suppose your old salary was ₹50,000, and now the company has increased it to ₹60,000. Then your increment will be like this: (New salary – Old salary) ÷ Old salary × 100. That is, (60,000 – 50,000) ÷ 50,000 × 100 = 20% increment.
When only the amount of the hike is mentioned
If the company said that you got a hike of ₹10,000 and your old salary was ₹50,000, then its percentage will be: (amount of hike ÷ old salary) × 100. That is, 10,000 ÷ 50,000 × 100 = 20% increment.
When a percentage is mentioned
If the company said that you got a 20% increment and your old salary was ₹50,000, then your new salary will be: (percentage × old salary) ÷ 100 + old salary. That is, (20 × 50,000) ÷ 100 + 50,000 = ₹10,000 + ₹50,000 = ₹60,000.
Some important Rules related to salary
Gross Salary
This is your entire CTC (Cost to Company), which includes all allowances and benefits.
Net Salary
This is the amount that is formed after all deductions (such as PF, tax, etc.).
Take-home Salary
Net Salary is commonly called take-home salary.
Every employee needs to understand the calculation of salary increments. It not only gives you transparency but also helps you to make better and informed decisions for your career.