7 Factors Affecting Employee Salary Increases

IT People Blog – Who does not want to get a salary that continues to rise? You also certainly have similar expectations when starting a career at work. Wages or salaries of employees from labor law in Indonesia are determined through conventions, work agreements, or statutory regulations.

7 Factors Affecting Employee Salary Increases

Meanwhile, periodic salary increases for employees are carried out through a review of years of service and periodic evaluation of salary structure and scale adjustments, taking into account the level of productivity and company expertise so that the company does not feel a loss when there is an increase in salary and employees are also satisfied with the increase in salary income.

There are several internal and external aspects that affect the amount of increase in salary or employee income.

Factors Affecting Employee Salary Increase

The following are some of the factors that cause an increase in the salary of an employee in a company, namely:

1. Government Regulation

Every year, the government announces an increase in the minimum wage as a safety net for workers so that the results of the salary can provide a decent living. The minimum wage is the lowest wage for employees in the lowest position with less than one year of service

With the increase in the minimum wage, industrial companies must familiarize themselves with the structure and scale of industrial wages. The percentage increase in salary can follow the increase in the minimum wage or the Job Creation Act, provided that the lowest wage cannot be less than the minimum wage for work (UMK).

2. Company Expertise

The scale of the business as well as the financial state of the industry affect the skill in paying employees’ salaries. As during the pandemic, when many industries were affected by the COVID-19 outbreak, many industries laid off employees because they could not pay salaries, let alone raise wages.

The rules for salary increase must be guided by the structure, scale of industry wages and industry financial expertise. The industry can carry out an analysis of the impact/effect of increasing employee income on industry income. So adjust everything to the needs and expertise of the industry, lest to meet the needs of employees, the company turns out to be a loss.

3. Position and Responsibilities

The wage or salary scale in a company describes the salary level. So the higher the position, the greater the compensation that will be received. This is a form of fair pay system, where jobs with more responsibilities earn more rewards.

If there is a change of position or accumulation of duties and responsibilities, the company will generally offer a salary increase that is adjusted to the new responsibilities. Therefore, promotions are always accompanied by an increase in income.

4. Working Period

Term of service describes the donation and loyalty of employees to the company. Salary increases are given as a form of appreciation by the company to employees. Most industries think of an employee’s tenure as the basis for providing adjustments or increases in income.

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5. Productivity and Job Evaluation

The increase in income should be made in such a way that it is directly related to work productivity so that employees are more motivated in doing their jobs. The following are aspects that can be evaluated:

  • Achievement of targets or KPIs (key performance indicators)
  • Compliance with regulations, for example taking into account aspects of order, discipline, late arrival to work, work ethic and others.

Some companies that emphasize the loyalty aspect also give points for a person’s tenure at the company in terms of salary increases, so that workers will not move to other companies.

With today’s increasingly advanced technology, employee income adjustments can be assisted with various applications so how to calculate salary increases can be easily done. The Performance Management and KPI features will make HR work faster and more efficient because HR no longer needs to manually generate appraisal reports.

6. Position of the Trade Union

Trade unions and employers can enter into collective labor agreements (PKB) to control wage issues. Not only that, through discussion, unions can also influence the decisions of the industry in which they work by asking for an increase in wages.

That is what happened when the government decided not to increase the minimum wage in 2021. At that time, some trade unions in industries not affected by the COVID-19 pandemic held discussions with industry representatives so that they always raise their own minimum wages.

7. Decent Living Needs

A decent living requirement (KHL) is the standard of living for a single worker in order to live physically fit for a month. KHL is obtained from the results of a survey conducted by the National Wage Council and is reviewed every 5 years.

The Minister of Manpower after that set KHL as one of the considerations for increasing the minimum wage. KHL 2020 has 64 components grouped into 7 types of needs, including food and beverages; clothing; housing area; education; health; transportation; and recreation, savings, and social security.

Here are some things about the importance of salary increases for employees and the factors that influence it. If you are an owner or HRD then this can be your knowledge material about increasing the income of the employees in your company.

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