Understand salary increment in simple language

Salary increment means increase in your annual income. This increase is based on your hard work and performance and is mostly stated in percentage. Many times this increment also plays a big role in your upcoming job change because the new company also pays attention to the previous increase.

How is increment decided?

Increment does not depend only on performance appraisal. Yes, whether you completed your annual target, key performance indicators (KPIs), key responsible areas (KRAs) or not, and how was your rating, these are important factors. But apart from these, many things are also important, such as:

• The state of the industry you are working in (eg. IT, banking, healthcare).
• The financial condition and profit of the company.
• The budget of your department.
• How many years you have been in the job, your qualifications and the specialty of the role.

How to calculate salary increment?
Now comes the real question, how is increment calculated? There are three common ways of doing this.

1. When the new salary is announced

Suppose your old salary was ₹50,000 and now the company has increased it to ₹60,000. The formula is:

(New salary–Old salary)÷ Old salary × 100

= (60,000 – 50,000) ÷ 50,000 × 100 = 20% increment

2. When only increment amount is mentioned

If the company said that you will get a hike of ₹10,000 and your old salary is ₹50,000, then the formula will be:

(Increment amount ÷ old salary) × 100

= 10,000 ÷ 50,000 × 100 = 20% increment

3. When stated in percentage

If the company says you have received a 20% increment and your old salary is ₹50,000, then the formula will be:

(Percentage × old salary) ÷ 100 + old salary

= (20 × 50,000) ÷ 100 + 50,000 = 10,000 + 50,000 = ₹60,000

Important terms related to salary

Gross salary: Your full CTC including all allowances and benefits.
Net salary: The amount received after all deductions (PF, tax etc.).

Take-home salary: Net salary is commonly known as take-home.

It is important for every employee to know the calculation of salary increment. This not only gives you transparency but also helps you take better decisions for your career. Along with performance, the financial condition of the company and the condition of the industry also affect your increment.

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Companies in the country can increase the salaries of their employees by an average of 9.6 percent in 2024. This is equal to last year’s salary increase. This estimate has been made in a report by advisory company EY. The report also said that the overall attrition rate has declined from 21.2 percent last year to 18.3 percent by 2022.

It is likely to decrease further in the next few years. The report says that the highest salary increase of 10.9 percent is expected in the e-commerce sector in 2024. After this, a salary increase of 10.1 percent is expected in the financial services sector.

It says that the salaries of employees working in the professional services sector will increase by 10 percent in 2024. This report is based on information received from 80 companies from different sectors.

The average number of employees in these companies is between 5,000 to 10,000. It says that Indian companies will give an average salary increase of 9.6 percent in 2024, which is the same as the actual increase in 2023.

Salary increase more in professional fields

Abhishek Sen of EY India said, “The overall average salary growth in Indian companies is stable compared to last year, but some professional sectors like ecommerce, financial services and service sector may see significant salary growth in 2024.

There is also a clear trend towards adopting higher reward value propositions to drive better ROI across industries. “Moving forward, organizations will harness the transformative power of AI to create unique benefits packages, optimize reward processes, and increase overall employee satisfaction in the workplace.”

Attrition rate

According to the report, attrition rates in India are fluctuating, influenced by macroeconomic factors and internal corporate strategies. The overall attrition rate fell to 18.3% in 2023, from 21.2% in 2022. The highest levels of attrition in 2023 were in financial services (24.8%), professional services (24.2%) and information technology (23.3%).

This year, the number of voluntary attrition declined slightly, while the rate of involuntary attrition increased, especially among global companies, indicating layoffs in the IT and startup sectors due to global economic changes.

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