Focal (Common) Versus Anniversary Salary Increase Date - Part 2

In my previous post about focal (or common) versus anniversary salary increase dates, I called attention to recent survey findings by Buck Consultants showing that over 80% of responding organizations use a focal/common date for their salary reviews - rather than employees' anniversary dates.

Reader (and prolific author in his own right) Frank Giancola responded with a comment noting one of the biggest challenges that accompanies focal date salary increases - a point worth of its own post:

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?

I can't say that I know an ideal way of addressing this situation.  The approach which I see used most frequently is this one:  Employees who are hired during the first three quarters of the salary increase year are awarded a prorated increase for the amount of time worked during that cycle, and employees who are hired during the last quarter (in some cases the last two months) of the salary increase year are not eligible for an increase until the following salary review date (at which time, some organizations do the "plussing up" mentioned by Frank and some do not).

It isn't perfect for all of the obvious reasons.  But I haven't heard it mentioned much as a point of pain, either in speaking to my clients (typically the HR or compensation head) or in employee interviews and focus group sessions.

Has anyone out there found a better way to handle employees hired during the year under a focal/common date salary review program?  Or even your experience with a different approach?   

Comments

[Faby]

Hi Ann,
Thank you for this decent article. I'm an expat auditor in PwC San Jose, originally from PwC Seoul Korea. While auditing a client, I faced the terminology 'focal', and couldn't understand what it meant (absolutely far-away from the dictionary meaning). Thanks to this article I Googled, now I can understand it clearly. By the way, is it common to grant stock options as part of 'focal'? It would require complex consideration on the company's long-run performance and capital structure.