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When employees perform well, take on more responsibility, or upgrade their skills, a pay raise is the most common way of recognising their efforts. Organisations may also offer non-salary benefits, such as a day off or dental coverage.

When determining how to calculate the salary hike percentage, you will also need to consider the benefits. Often, an employer will offer a salary hike but not offer enough wellness benefits for its employees. Today, employees place equal, if not more important, on employee benefits when considering a job offer. 

In addition, while implementing these benefits, you also must know how to communicate the same to your employees. They must understand the importance of these benefits. In this article, we will guide you on everything about approaching salary revisions with your employees. 

How to calculate salary hike percentage of an employee?

Cost of living, the longevity of service, or simply dissuading employees from leaving also play a role in salary increment. Hence, when giving them a salary revision letter, include a detailed breakup. Before we talk about how to approach salary revision, let's discuss the steps to understand how to calculate salary hike percentage. 

Step 1: Deduct your old salary from the new salary.

Step 2: Divide the above difference by the old salary 

Step 3: Multiply it by 100.

When to approach a salary revision for employees?

The time for revision of salaries varies with each organisation. Some companies may set criteria that only employees who have stayed for a company for a year or so will be eligible for these revisions. Also, before approaching the pay revisions, review your financial budgets and then design a plan. Following are some cases when you can approach a salary revision :

  • The most common time to address it is annually after the performance evaluation. However, don't do both simultaneously. Keep a satisfactory period between the two. 
  • Another time is when employees achieve the set performance benchmarks established under the company policy. It can be anytime during the year. 
  • A salary revision is necessary if an employee has been loyal and worked with the company for some continuous years. Thus, consider the longevity of the service of the employee.
  • Another time to approach salary revision is to maintain consistency with industry salary rates. You need to update your salary structure as well with minimum industry standards. 
  • Lastly, if the company is doing well, you can offer year-end bonuses as an appreciation for hard work. 

How to approach a salary revision for employees?

Here are some suggestions on how to approach salary revision with your employees.

Establish a set standards revision plan

First and foremost, design a salary revision plan based on your financial budget. Next, set some performance benchmarks in the company's policies.  You can compare employees' performances to the set benchmark. Also, it will provide a sense of transparency all over the organisation. The transparency will also remove any doubts of any discrimination or personal bias. 

Understand the market 

Market trends keep changing, and it's critical to stay in line with industry salary rates. If you don't offer even a minimum salary compared to the industry, then you won't be able to retain your employees. 

Take suggestions from leaders

Team leaders, managers or supervisors are the first points of contact for the employees. Hence, no one can be a better judge than them to evaluate employee performance. Thus, try to include their suggestions for reviewing salary revisions for the employees. Even during communication of salary revision, make them a part of it. Employees will also be more comfortable communicating any doubts. 

Ask employees to self-evaluate 

Each person is the best judge of themselves. Hence, since the whole point is salary revision of employees, why not include them in the process? Give each employee a self-evaluation form where they will review their performance in the last year. You can ask them to rate from 1 to 10. You can even ask them to write if they need help from the company in any department. 

Open Communication 

Two-way communication between the employer and employee is necessary. In this, you can understand what non-salary perks are employees looking for, like a child welfare fund. It will help highlight the incentives which are of more value to the employees. It can also include opportunities to engage in more challenging projects for better promotion in the future. The more open you are to their suggestions and opinions, the more they will be willing to accept the salary revisions. 

Be transparent

Lastly, make sure you are clear and vague about the whole process. In short, don't be vague. If the employee has not performed well and may not earn a salary raise right now, explain to them the reasons behind that. Provide them guidance on how they can do better. In other cases, if the employee was expecting more than given, then appreciate them for their efforts and contributions. Help them review their performance with market analysis and what they can do to achieve a higher increment. You can even help them upgrade their skills. 

In a nutshell 

After reading the article, you will know how to calculate salary hike percentage, and how to handle salary revisions. It is a delicate matter, and hence you need to be cautious.

You must understand how to balance employee expectations with both salary and non-salary perks. Today, perks play a very prominent role in employee retention at a workplace.

At Plum Insurance, you can access mental wellness benefits, multiple consultations, health insurance, dental care, and more, customised to your team's needs. Furthermore, all these perks are accessible by the employees on our Plum Insurance portal. If employees have any doubts about claims, they can connect with our available support team via chat, email or phone.


Q. How do organizations tailor non-salary benefits to meet the diverse needs of their employees, especially in large and varied workforces?

A. Organizations conduct surveys and feedback sessions to understand diverse employee needs. They offer flexible benefits packages, allowing employees to choose what suits them best. This method ensures that benefits cater to varied preferences, enhancing satisfaction and retention. Therefore, customization becomes key in addressing the workforce's diverse needs effectively.

Q. What strategies do companies employ to ensure fairness and transparency when employees self-evaluate their performance for salary revisions?

A. Companies set clear criteria and guidelines for self-evaluation, ensuring employees understand what is expected. They provide training on objective self-assessment to avoid biases. Additionally, peer reviews and manager evaluations complement self-assessments, ensuring a holistic view of performance. This multi-faceted approach fosters fairness and transparency in the process.

Q. How do companies handle salary revision negotiations when an employee's expectations significantly exceed the offer, despite the company's explanation and guidance?

A. Companies engage in open dialogue, explaining the basis for their offer and how it aligns with market standards and company performance. They discuss potential career paths and development opportunities that may lead to future raises. If possible, they offer non-monetary benefits or incentives as alternatives. This empathetic and transparent approach helps in managing expectations and maintaining a positive relationship.