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Free letter template · Word

No-Increment Letter

A no-increment letter informs an individual employee that they will not receive an increment in the current cycle, usually because performance did not meet the expected standard. It shares the facts respectfully, sets clear improvement goals and offers a review date when pay can be reconsidered.

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Preview of the letter

[Highlighted] = fill in
[Company Logo][Company Name]

APPRAISAL OUTCOME – NO INCREMENT

Ref. No.:
[Reference Number]
Date:
[Date]

Private and Confidential
To,
[Employee Name]
Employee ID: [Employee ID]
[Designation], [Department]

Subject: Outcome of Annual Review for [Review Period]

Dear [Employee Name],
Thank you for taking part in the annual review discussion with [Reporting Manager] on [DD/MM/YYYY]. This letter confirms the outcome. Based on the review, no increment will be given to you in the current cycle, and your current salary of ₹[CTC] per annum will continue.

Reasons

  • [Reason 1 – e.g. achievement of 62% against the agreed quarterly targets]
  • [Reason 2 – e.g. repeated delays in submission of monthly reports, as discussed on DD/MM/YYYY]
  • [Other – e.g. less than the minimum service period in the appraisal year / pay above grade maximum]

Goals for the next review

GoalMeasureTarget Date
[Goal 1][Measure][DD/MM/YYYY]
[Goal 2][Measure][DD/MM/YYYY]
[Goal 3][Measure][DD/MM/YYYY]

To support you, the company will provide [Support – e.g. a product training programme and fortnightly check-ins with your manager]. Your performance and pay will be reviewed again on [Review Date].

If you would like to share your view on this outcome, you may write to [HR Name] within [Number] working days. We believe in your ability to improve and are committed to helping you succeed.

Regards,

[Reporting Manager]
[Designation]
For [Company Name]
[HR Name]
HR Department
Acknowledged by
[Employee Name]
Date: [Date]

What this template includes

  • Appraisal period and outcome
  • Specific, factual reasons
  • Improvement areas with measurable goals
  • Support offered (training, mentoring)
  • Review date for reconsideration
  • Invitation to discuss or respond

When to use it

  • Appraisal rating below the threshold for an increment
  • Employee on a performance improvement plan during the cycle
  • Insufficient service in the appraisal period, as per policy
  • Pay already above the maximum of the grade range

How to customise this template

  1. 1Select the applicable reason and delete others
  2. 2Write two or three measurable goals agreed with the manager
  3. 3Set a realistic review date (e.g. after 6 months)
  4. 4Name the support the company will provide

HR tips

  • Discuss the outcome in person before handing over the letter
  • Stick to facts and avoid personal or harsh language
  • Give the employee a chance to respond
  • Follow through on the promised review

For HR & hiring managers

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Frequently asked questions

Can a company give zero increment?+

Yes. Increments are generally not a legal entitlement in the private sector unless a contract, settlement or policy promises one. The decision should be fair and documented.

How do I tell an employee there is no increment?+

Meet the employee privately, explain the reasons with examples, agree improvement goals and confirm the conversation in a written letter.

Can the employee appeal a no-increment decision?+

Many companies allow an appeal or a discussion with HR or the skip-level manager. Mention the route in the letter.