Purpose
The Increment Policy is designed to provide a transparent, fair, and consistent framework for rewarding employee performance, seniority, and market competitiveness. By outlining how salary increments are calculated and applied, the policy helps organisations retain talent, motivate staff, and align remuneration with business goals.
Core Principles
- Equity: All employees who meet the defined criteria receive comparable treatment irrespective of department or location.
- Meritocracy: Performancebased increments recognize contributions that exceed expectations.
- Transparency: The methodology, timelines and eligibility are openly communicated.
- Affordability: Increments are budgeted within the organizations financial plan.
- Compliance: The policy complies with local labour laws, collective bargaining agreements and internal governance.
Increment Process
1. Planning Phase
Human Resources (HR) works with Finance to forecast the total funds available for salary adjustments for the upcoming fiscal year. The forecast incorporates expected inflation, market salary surveys and strategic workforce planning.
2. Performance Review Cycle
Managers conduct performance appraisals using the organisations standard rating scale (e.g., 15). Ratings are documented in the performance management system and become the primary input for meritbased increments.
3. Eligibility Check
HR validates that each employee satisfies the eligibility criteria (tenure, performance rating, disciplinary record, etc.). Employees who do not meet the criteria are excluded from the increment pool for that cycle.
4. Increment Calculation
The following formula is used:
Base Rate set by tenure (e.g., 2% after 1 year, 3% after 3 years).
Performance Adjustment linked to rating (e.g., 0% for rating 3, +2% for rating 4, +4% for rating 5).
Market Adjustment applied when external salary surveys indicate a gap (up to 2%).
5. Management Review
Department heads review the calculated increments to ensure alignment with budget constraints and strategic priorities. Adjustments may be made in exceptional cases.
6. Approval & Implementation
Final approval is obtained from the Executive Compensation Committee. HR then updates payroll records, and the new salaries become effective on the designated salaryreview date (usually 1July or 1January).
Eligibility Criteria
| Criterion | Requirement |
|---|---|
| Minimum tenure | Completed at least 12 months of continuous service by the review date. |
| Performance rating | Rating of 3 (meets expectations) or higher. |
| Attendance | No unauthorised absences exceeding 5 days in the review year. |
| Disciplinary record | No final written warnings or disciplinary actions within the last 12 months. |
| Probation status | Employees must have successfully completed their probation period. |
Frequency & Timing
Increments are typically administered once per fiscal year. However, an additional midyear adjustment may be granted under the following circumstances:
- Significant change in market salary benchmarks.
- Promotion to a higher grade or role.
- Exceptional performance that warrants immediate recognition.
All adjustments must follow the same validation and approval steps as the annual cycle.
Budget & Funding
The total increment budget is expressed as a percentage of the current payroll (e.g., 3% of total salary expense). Budget allocation is broken down by business unit, allowing each unit to plan its own distribution while staying within the overall limit.
Any unspent allocation at the end of the fiscal year is rolled into the next years budget, provided it conforms to the organisations longterm compensation strategy.
Communication Strategy
Clear communication reduces uncertainty and reinforces trust. The following steps are taken:
- HR publishes the Increment Policy on the internal portal at least 60 days before the review period.
- Managers hold oneonone meetings with their team members to explain how performance ratings translate into salary changes.
- A summary letter, signed by the ChiefHumanResources Officer, is sent to all eligible employees after approvals are finalised.
- FAQs and contact details for the Compensation Helpdesk are provided for any followup queries.
Frequently Asked Questions
What if my performance rating is below the minimum?
Employees with a rating below 3 are not eligible for an increment in the current cycle. They are encouraged to work with their manager on a development plan to improve performance for the next review.
Can an employee receive more than one type of increment?
Yes. An employee may receive a base tenure increment, a performance increment, and a market adjustment in the same cycle, provided each component meets its respective criteria.
How are promotions handled?
Promotions trigger an immediate salary adjustment to the new grades baseline, plus any applicable performance increment. The promotion adjustment is processed through the same approval workflow.
Is there a cap on the total increment percentage?
The policy sets a maximum combined increment of 7% per employee per fiscal year to protect budget integrity. Exceptions require documented justification and seniorexecutive signoff.
What happens if the budget is insufficient?
When budget constraints arise, HR works with Finance to prioritize increments based on performance rating, critical skill shortages, and retention risk. Lowerrated increments may be deferred.
