Personally I feel that the entire system of Hikes and Bonuses in India is flawed. Hikes and bonuses are given to an individual at the end of the year based on his/her performance. Hikes are based purely on the performance of an individual and is a function of the performance of the others in the team to the amount allocated to the unit. On the other hand, the bonus given to an individual is of course a function of the performance of the individual, but is also dependent to a greater extent on the performance of the company itself(cascading down to LoBs, org units, teams etc.)
I suppose not many of you who are reading this find any flaw in this system. Ok, so the company does well and makes a lot of revenue and decides to reward its employees with a fat bonus, or otherwise. I too do not have any problem with this and I think this is perfectly valid. How the company has performed in the previous year(as also how I have performed in the last year and contributed to my company’s performance), is how the bonus is paid out and is the correct thing to do.
Now also consider the hike. The hike that you get is also based on your performance of the last year. So basically there is not much difference between the way the bonus and the hike is calculated. Obviously, if a company doesn’t do well, its ability to pay out hikes and bonuses are equally limited. Anyway, my point is that, while bonuses are paid for the year that has passed, hikes should be given for the year ahead.
A bonus is a reward and A hike is an incentive.
Goal settings are done at the beginning of the year right? It is when the manager defines what the individual is expected to do in the year ahead. The bonus is anyway there is reward the individual should he/she do his/her job well. So then the hike should be an incentive to the individual to take up more responsibilities and execute them with utmost dedication.
The goal setting should happen in the beginning of the year and simultaneously the employee should be given his/her hikes for the year ahead. If the individual feels that he/she is being asked to do too much beyond his/her call of duty, then it is up to the manager to make the employee feel that he/she is earning the hike. Or on the contrary, the employee can decide whether he/she is being paid enough to do the job that he/she has to do. Slogging it out for the entire year and then expecting a hike is not the correct thing, as there are a lot of chances for you to be screwed over during your appraisal.
Ultimately it boils down to the same thing. You do get your dues – hikes and bonuses – at the beginning of the year, but at least in this way it is transparent what the two things are meant for and also it gives the employee a say in the matter and the employee doesn’t need to feel treated like a slave.
What are your thoughts?