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2016-07-14 00:00:00Money & FinanceEnglishDetermining accurate salary increments for your employees is a way to create an atmosphere of collaboration and dedication. Salary Increments for Employees

Determining Salary Increments for Employees

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Your employees and their performance are the building blocks on which your company is built. Therefore it is as important to pay them a fair salary as it is to foster a spirit of collaboration and teamwork in the workplace.

But as many startups move from the stage of bootstrapping to achieving larger growth, the question for the small business owner then becomes- how do you determine the salary increments? Your priority is to keep employees happy while also ensuring you do not overpay them.

Here are a few factors to consider when determining employee salary increments.


Perhaps the most important criterion is how the employee functions within your organization and how much they contribute to the success of the organization. Important facets to consider are adherence to deadlines, regularity, loyalty and how well he or she does the job. Your employee’s performance should also take into account how they interact with subordinates, clients and managers as this will ensure you are building your business around the right kind of people.

Cost of Living:

While you may feel like an employee’s performance has stagnated or they are not living up to their full potential, it is still vital to consider them for an increment for the simple reason that the cost of living rises every year.

It is important to consider the current cost of living and the nation’s economy when determining what increment to offer employees. It’s also critical that you pay your employees a decent living wage.

Issues on performance should be dealt with head-on and addressed with the employee through the year, not just during the time for appraisals.

Your Business Finances:

As an employer, you are also constrained about what you can offer your employees because of the state of your finances. It is difficult, often during the early days of your business, to allocate a lot of resources towards salaries and you might not be able to offer employees a salary comparable with their skills.

Before you talk of increments, check the status of your business and plan what you can offer your employees either through salaries or a performance-based incentive or bonuses. Remember to structure their increments so that it benefits you as an organization as well as meets their needs and expectations.

Current and Future Responsibilities:

Salary increments exist to reward past performance while gauging future potential. If you feel that an employee has excelled and has the potential to take on more responsibilities in the coming year, then you must determine their value accordingly.

Remember it is less expensive to retain an employee than hiring and training a new one. Increments are one of the ways that we show employees that we value their contributions and hope that they continue to grow along with the company.

Ensure that your discussions around increments are not purely transactional, focused on money alone. Let your employees know how much you appreciate their contribution and how you count on their efforts and loyalty in order for your company to thrive.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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