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Appraisal time: How to prepare and stay on course, financially

Salary hike for the year ahead is expected to be the lowest in the decade at 9.3 percent, as per the latest Aon 2020 survey.

It's appraisal time and some surveys are cutting a gloomy picture. Salary hike for the year ahead is expected to be the lowest in the decade at 9.3 percent, as per the latest Aon 2020 survey. Of course, some industries like e-commerce, pharma and IT are likely to dole out more moolah than the rest. 

Is it a cause for worry? Can it delay or jeopardize your long-term financial goals?

There are steps that you can to take to stay on course financially:

1. Check the norm

 First of all, don’t read too much into these surveys. While it does indicate the broad trend, it’s more important to figure out how your industry and your company stack up. 

Talk to your peers in the industry and find out how your company fared during the year – its revenue and profit growth. It is likely that it has done exceeding well despite tough business conditions. 

Such information – when juxtaposed with past data – can let you guess the figure close to the actual.

2. Communicate
 
If you have already got the magic number, (pay hike that is) check if it’s in sync with that of your colleagues/industry peers. Also, ask your colleagues in other departments about their hike to know the overall trend. 
 
If you think your salary hike is not up to the mark, communicate it with your boss. While Indian economy is slowing, there is also a war for talent and those with niche skills. So, don’t let the overall gloom affect your expectations. If you are convinced that you got a raw deal, look for greener pastures. 
 
3. Negotiate
 
Gather testimonials, management/client feedback or your performance results - if you hadn’t done it earlier - to push the envelope. Or may be highlight the fact about shouldering additional responsibilities when someone quit. 
 
If getting a hike is a stretch, look at alternative pay options. For instance, the salary budget might be difficult to stretch for the company, but not its training and development budget. So, you can ask for sponsorship of courses that will make a positive difference to your everyday work. 
 
If budget is the only constraint for the company, ask for a promotion or flexibility at work.
Or may be bag an ESOP – if you are working for a start-up. 
 
In this exercise, it is important to keep investing as per your financial plan. SIP investments towards important financial goals should not get compromised just because of one bad year of salary hike.  
 
4. Stay on budget
 
 
If the salary hike is lesser than expected, trim down unnecessary spending. In this exercise, it is important to keep investing as per your financial plan. SIP investments towards important financial goals should not get compromised just because of one bad year of salary hike.  
 
Alternatively, a more-than-expected salary hike can be channelized towards reducing expensive debt (credit card or personal) or padding up your investments.
 
5. Reality check
 
It’s not just the hike that matters. More important, is the extent to which it tangibly increases your income after deducting taxes. So read the fine print. 
 
What component of salary has increased and what are its tax implications?
Tax, provident fund contributions reduce your monthly take-home salary. Moreover, if you have shifted to a higher tax slab, it might call for more investments to reduce tax liabilities.
 
Also it is possible that bulk of the salary increase is in the form of variable pay (that you will receive in the future, subject to performance). It is prudent to give at least two months, to find out the implication of a salary hike on your take-home salary. 
 
6. Stay-ahead
 
 
If you have got an increment it is because your employer is happy with your performance. To keep the competitive edge, you need to upgrade your skill-sets and enhance your professional value. So, ensure part of the money goes towards attending workshops and courses that will keep you ahead in the corporate world.
 
Takeaway
 
Salary surveys might paint a gloomy picture, but high performers and those with special skills and talent can still manage to get above-average pay hikes. So, do the necessary due diligence and let not the salary hike compromise your investing towards important financial goals.
 

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