A salary increment letter is an official document, authored by the Employer for the Employee, communicating change (increase) in Salary Structure. Different companies have different processes for managing salary increments.
Traditionally, most companies offered increments to all employees simultaneously (often effective from the same date).
In recent years, new-age companies have come up with an alternate process where the increment for each employee happens at a fixed time after their joining or previous increment.
Writing an increment letter properly is very important as it is considered an official document and can be considered valid in case of legal disputes. It is also essential to ensure that the increment letter is crisp, to the point, and self-explanatory.
Increment typically follows a performance appraisal of the employee. Thus, quite a few companies still combine the Appraisal letter with the Increment letter. It is highly recommended that both documents are created separately.
The most important reason is the difference in the audience of the Appraisal letter and the Increment letter. The Employee’s direct manager often hands over the appraisal.
On the other hand, the department/company leadership decides the increment in consultation with HR. In such cases, keeping the increment details confidential from the direct report may be required.
Now let’s understand more about how an ideal Increment letter should be written.
What should an increment letter include
As mentioned already, there could be two kinds of increment letters:
- Typical letter for appraisal details and increment details
- Separate letter for appraisal and increment (Recommended)
In the case of the first option, where the appraisal and increment are communicated together, the following details must be present:
- Performance Rating Information
- Comments on Performance (It is ok to keep this simple, high level, and congratulatory)
- Increment Details:
New Salary
Increase (In absolute & percentage)
The effective date of the New Salary
Changes in bonuses, perks, and benefits
The validity period of the new salary - Option and process for redressal (In case the employee is unhappy with increment)
- Other Conditions (e.g., Secrecy of the letter)
- A place to sign and accept
In the case of the second option, most of the components remain the same. We can keep the Performance Rating information out of it. In such cases, it is crucial to refer to the appraisal letter (by Document name, date, etc.)
In terms of tonality, it is essential to ensure that the letter is respectful and warm. The employee might want to share the document with family members. It’s thus suitable to keep it friendly.
Increment letter format
A sample format of the increment letter is given below:
Employer’s Business Address
Date
Employee’s Address
Salutation (Dear ABC),
Subject: Letter of Increment or Appraisal
We want to congratulate you on your hard work and contributions to the. Company. Based on your performance, the details of which have already been shared with you in your appraisal letter,
We are glad to inform you that we are increasing your salary by *percent*% from *amount* to *amount* for your performance. The new salary will be effective from *Date*
We are also rewarding you with a bonus of *amount* for being an asset to the company. This bonus amount will be credited to your account on *Date*. Please find the complete details of the increment in the annexure attached with the letter.
We want to thank you for your loyalty and commitment to the organization. We hope you will continue to be a part of this organization and contribute to its growth and success.
If you have concerns with your new salary, you could reach out to *email address*. Mention your employee Id in the subject line of your redressal mail.
Regards,
Complimentary Close
Name (Designation)
Why is it necessary for employers to communicate with the employees about their increment
The employer’s role in communicating the salary to the employee is a critical factor. The employers must convey the reason for the appraisal, the increase in the salary amount, and which part of their salary it will reflect on.
It is recommended that managers do not use the percentage increase while communicating about the raise, as this may keep the candidate puzzled. Employers must focus on the strengths and contributions of the employees as a member of the organization.They must also focus on how their contribution has been rewarding. It also paves the way for discussing the employer’s expectations of employee performance in the upcoming year.
Frequently asked questions (FAQ)
Employers must use a polite tone while communicating with the employees. The employers must convey the reason for the rise, the amount being raised, and which part of their salary will reflect.
They must also focus on the strengths and contributions of the employees as a member of the organization.
An increment letter is also called an appraisal letter or hike letter. It is usually offered at the beginning of the financial year. It can also be provided if an employee’s performance is appreciable.
An increment is based on employee performance, performance, employee role, and company policy. It is thus different on a case-to-case basis
