Salary Restructuring : Requesting Advice

Dear all,

I request your valuable inputs for the following issue;

This is for an organization which has recently restructured in salary structure based on the industry standards. I wanted to know as to how would you increase the actual salary of each individual.

For eg, in grade 1, the existing minimum basic salary as per the structure was RS. 2,000. But after the salary review the minimum salary was changed to Rs. 5,000.But there are already people who are drawing 5,000 or more or even less in this grade. So, how much of increment should we propose to these employees. Lets say, if there are 5 employees existing in this grade drawing a basic salary of Rs.3000 , 4000, 5000, 6000 & 7,000 already, how much % increase shall we give to each employee.The person with 3000 rs salary may have less experience when compared to person with 4000 rs salary. So, we cannot make both of them as per the new set basic of Rs. 5000. Can you suggest some formula for computing some percentage increase to each employee's salary also taking into consideration their total years of experience and also the differential salary (more experienced employees getting more salary) which was existing before.

Awaiting your earliest response.

Regards
JM

Dear JM,

Salary restructuring is a complicated one as you have rightly pointed out if this is not done carefully employees may leave the organisation abruptly.

If your organisation does not have a scale of pay for each grade then it will be difficult for you to manage the pay revisions. For example

Grade 1 Basic Range 2000 - 5000

Grade 2 Basic Range 4000 - 7000

If you give a hike of Rs.2000/- in Grade 1 then the scale has to change from 2000 - 5000 to 4000 - 7000 otherwise as you are facing one employee may not get any hike in increment at all. By following this each employee will get a hike of Rs.2000/-. But this is only an example and you need to analyse the actual wage impact your company can afford before embarking on such an exercise. So I would recommend that you find out from your management as to how much % of their sales they intend to pay to their employees by way of salary and wages and then allocate the increase in wages for each grade. While working so please also take care of the direct and indirect expenses. Direct expenses are the actual increase you intend to give and indirect expenses are the earning heads that will increase owing to the hike. In case your HRA is linked as % of Basic then this will increase. Likewise your PF and ESI employer share will increase. LTA or Medical reimbursement is likely to increase if it is linked to your basic. In short compute the CTC for each employee and then arrive at the wage package.

Trust I have clarified to the extent possible.

M.V.KANNAN

Dear JM,
For these purposes, I would suggest that you hire HR professionals like me, who have over 40 years of industry experience out of which 20 years in HR domain alone !
Best wishes
NK Sundaram
9844008049
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