How to treat your Salary Increment

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Salary Increment

How to treat your Salary Increment

How to treat your Salary Increment is a weird question because we tend to be quite optimistic about it. But the reality may not be as simple as your Salary Increment Letter. March is around the corner and employees are getting into the formalities of their annual appraisal. Recent news of India being one of the best places in the Asia or rather world in terms of getting salary hike percentage, has also improved the mood this time.

Though there should not be much anticipation but you could expect a better hike in the range of anything under 20 per cent this year around which is going to be in line with the previous year salary increment or hike. We tend to focus only upon the salary increment percentage number. This is important but what is more important is “real salary increment”.

Real salary increment could vary from the salary increment number which you get because the general salary increment applies to your Cost to Company i.e. CTC and not the actual hike which reflects in the net take home salary. So it is important to carefully examine your salary increment letter and analysis the components which are increased rather than just plane salary increment percentage number.

A hike in components like HRA or addition in your fixed salary component would directly result in net take home. A rise in variable components like reimbursement component which includes phone and medical bills will also result in salary hike but some component will simply add in to your overall cost to company but will not result in net take home salary like insurance premium which is paid by company for the insurance coverage on you.

In the last few years, companies across sectors & specially IT companies have promoted a practice of flexible pay structure with variable components in the form of reimbursements which provides cushion against tax liabilities because broadly reimbursements are considered as expenses and not income. But there are lots of variable components which may not result in the net take home salary. So a salary increment of 15 per cent may not be the actual hike which you have got.

Structure of variable pay varies a lot from the company to company so the actual figure would depend upon your salary increment letter but examine it carefully before celebrating it.

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About akhilendra

Hi, I’m Akhilendra and I write about Business Analysis, Data Science, IT & Web. Join me on Twitter, Facebook & Google+

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