Merit vs Anniversary Pay Rates

Performance reviews are an integral part of business. Employees crave feedback, whether it is positive or negative, as it provides motivation and a better understanding of the job requirements. Anniversary Date and Common Merit Date performance reviews each have advantages and disadvantages. It would behoove the human resource professional to choose the approach that best suits their organization’s needs and goals. Some of the factors that should be taken into consideration are; planning cycles, hiring practices, and organizational culture (Koss, 2009, p. 7)

Anniversary reviews are commonly used when the organization has a lot of hourly, lower level employees (Koss, 2009, p.2). This method provides a fair system. “Every employee receives a performance appraisal and sometimes a compensation adjustment on the one year anniversary of their start in a job, and at one-year intervals thereafter. All employees get reviewed and receive compensation adjustments at the same interval” (p. 2). This method is popular when the organization wishes to evaluate select employee performances against industry established standards, instead of vetting an employee against an alternate employee (p 2). “[The Anniversary Date Method can] lighten the managers’ workloads and increases the likelihood that they’ll spend more time on their employee performance reviews, since they’re not caught trying to do them all at once. In addition, they spread out the appraisal-related workload over the year, avoiding processing peaks” (p. 2).

Sometimes, Anniversary Date reviews are not the ideal choice. “An employee’s future is based solely on his/her manager’s subjective opinion of them” (p. 2). When appraisals are conducted annually, and on the anniversary date, usually about half of the staff is in line with prospective organizational objectives (p. 2). Another con of this method is that the appraisal date generally does not match with any specific performance period (p. 2). This method can also result in inadequate reporting, and lesser understanding of why objectives were not met (p. 2). Because the manager is evaluating the performance of the individual, and not the comparative performance of their peers, it can create an unfair environment, and compensation allocations may be unequal (p. 3). Managers tend to try and accommodate the compensation budget, which is directly related to the cyclical ups and downs of the economy. If there is no money left in the budget, an employee with a year end review may receive a lower increase, not because they are less deserving, but because there is no more room left in the budget (p. 3).

Common Merit Date Reviews is a procedure where organizations evaluate all of their employees at one specific time (p. 3). “One of the biggest advantage is that …they allow for corporate and individual goals to unite. HR actually spends less administration time on focal reviews because the process typically runs over a few months, rather than an entire year. This allows for…everyone in the organization to align their goals appropriately” (p. 4). Because everything is done at one time, and each employee’s performance is being evaluated at the same time, managers can compare employees to each other, and provide consistent and fair appraisals, and allow for compensation to be [somewhat] unaffected by changing business cycles (p. 4). “Another advantage is that if any changes to evaluation criteria have to be made, new forms or processes can be distributed out to everyone at the same time” (p. 4). When the organization is focused on completing appraisals once a year, it can be much simpler to offer training on tools, processes, and skills necessary (p.5).

While there are many advantages to the Common Merit Date Review, there are still a few disadvantages. Newer employees will not be permitted a full year of performance for evaluation. If there are a large number of employees, managers will need a significant amount of time to review the process and may have to neglect other tasks until the process is complete (p. 6)

• Koss, S. (2009). Which is Best? Anniversary vs. Focal (Common Date) Performance Reviews. Koss Management. Retrieved February 26, 2011, from kosshrexpert.com/Article-WhichisBest.pdf