Compensation/Moving to a March 1st Review Date for All Employees

Dfox

I have recently been asked to evaluate changing our compensation program to a common review date of March 1st for all employees (we currently have over 600).  With our current program we review the employee's performance and salary once a year on their hire anniversary date.  Has anyone had any experience in changing to the common review date? 

 If yes, what were the impacts on the payroll department, and how was that handled?

 

BKate

We recently implemented a program to transition everyone at the company from an anniversary date annual performance evaluation to a common review date of March 1. At the same time, we revised our performance ratings and our approach to merit increases.

This first year of implementation is the hardest because performance reviews had to be conducted in December and January for every employee in the company regardless of when they had their last review. This created a significant workload for supervisors and managers. However, writing and conducting all of the reviews at once makes it easier for supervisors and managers to evaluate the performance of individuals in the context of the entire team.

Once the performance reviews are set, merit increases have to be calculated requiring that the increases be prorated. For instance, if an employee received a merit increase in September '06 the merit increase effective March 1 for the first year of our new program would be prorated for the 6-month period since the last increase, e.g., a 6% annual merit would translate to 3% effective March 1. On the other hand, an employee who last received a merit increase in January '06 would have a merit increase prorated for 13 months or 6.5% if the annual merit was 6%. While this makes for some complicated calculations and explanations in the first year, everyone will receive an annual merit increase on March 1 in subsequent years. Communication is key when implementing this type of change so that employees understand how their increases were calculated and what they can expect going forward.

The impact on the payroll department depends on how your payroll function is calculated. Employee records and the HRIS will have to be updated with new review dates and performance ratings. In addition, the merit increases effective March 1 will have to be included in the paycheck for the payroll period that includes the March 1 date. At your company, this means inputting the salary increases for 600 employees in a single pay period and making sure the data was entered properly so that the paycheck accurately reflects the new salary.

At any rate, these are some of the issues we considered.