Prevalence of Focal (Common) Date Versus Anniversary Date for Salary Reviews

In its recently released survey on Compensation Planning for 2008, Buck Consultants examined salary management practices among the 415 surveyed organizations; in particular, the timing of annual salary reviews.

The Buck survey found that most organizations - over 80% (82.2%) - administer annual salary increases on a focal (or common) review date.  This means that in most organizations, employees receive their annual salary increase on a common date such as January 1, rather than on the anniversary of their hire or promotion into their current position.

The last data I saw on increase timing, which was probably more than 5 years ago (and I no longer am able to put my hands on it), showed something much closer to an even split between the use of focal/common dates and the use of anniversary dates.  So it would seem that there is a trend underfoot.  And my guess is that a parallel trend exists for performance review timing, particularly as organizations work to create alignment between organizational objectives and individual performance objectives.  This alignment seems to happen more smoothly when the timing of individual performance planning is in sync with (and slightly lags) organizational planning and objective setting.  Not so smoothly when every employee has their own unique performance cycle.

Comments

[FrankGiancola]

Ann,

As you are aware, there is one potential issue with the focal date performance increase option---employees are hired throughout the year, so some reach their first focal date with less than a year of service, which presents the employer with a choice of granting a full increase with less than a year of performance, prorating the increase for the amount of time worked in the cycle, or making the employee wait to the following cycle and plussing up the increase to account for the time over one year. All options seem to represent a less than ideal way to introduce an employee to a firm's pay for performance plan.

Are you aware of an effective way of dealing with this situation?

Frank

[Ann Bares]

Frank:

An excellent point, and one worth its own post, I think. So let me throw out some thoughts there and then invite comment from you and any others on the question.

Thanks, as always, for the comment!

[Rick]

What are some of the recommended approaches to converting from Anniversary Date performance reviews to a focal date? The main concern is the manner in which one's increase for the year of the conversion would be prorated to address the change in the timing. In conjunction with that point, how does one address situations where review dates are pushed back as opposed to being pushed forward? I would assume raises would be prorated at the time of the new review but this would lead, potentially, to a large population feeling as if their review was pushed back to delay the Firm's outlay of salary expense.