Shawnee Love •
May 12, 2017
This is not a blog about time passing although over a year of time things can certainly be different. This blog is about types of year and choosing wisely.You see, in the world of HR, there are 3 types of years:
- Calendar Year- From January to December,
- Fiscal Year- The Employer’s financial cycle which ends unsurprisingly at Fiscal Year End and starts again the day after.
- Employment Year- From the employee’s start date for 12 months.
These “years” have the obvious in common- they are all 12 months long. Where they are different is in start and end dates, and this becomes important when discussing timing of perks and benefits.
Let’s consider bonus for example. From the employer’s perspective, having bonus tied to the fiscal year makes sense, because it ties in with timing of financial reporting. That is, you will know how you did for the time period, so you can establish whether the employee met the objectives and whether the company did overall as well. But if you don’t specify bonus is tied to the fiscal year, most new hires will assume yearly bonus aligns with either the calendar year or their personal employment year. And when it comes to bonus, not getting it when its expected, can lead to dissatisfaction and morale issues.
Vacation is another benefit where the year can be important. For example, if an employee starts in June 2017, offering 2 weeks per calendar year could be interpreted as having 2 weeks in 2017 and 2 weeks in 2018. Clearly that is not what most employers intend. Instead, they would be better served to specify 2 weeks per employment year or indicate that the 2 weeks per calendar year is “prorated in the first calendar year”.
Miscommunication and misunderstandings about terms and conditions of employment create problems down the road with individual and team morale regardless of intent. Moreover, when it comes to employment terms, it is the company’s responsibility to ensure the employee understands.
You can minimize confusion and doubt by spelling all this out in an offer letter. When doing so, we hope you will give consideration to which “year” you mean and ensure it is specified up front.