Annual Review
A formal performance evaluation conducted yearly (or semi-annually) that assesses an employee's performance, provides feedback, and typically determines raises, bonuses, and promotion eligibility. The primary formal mechanism for compensation growth.
An annual review (also called a performance review or performance appraisal) is a structured evaluation of an employee's performance over a defined period, typically conducted by the direct manager. **Standard components:** - Self-assessment (employee documents their accomplishments, challenges, and goals) - Manager assessment (rating against predetermined criteria or competencies) - Goal-setting for the next period - Compensation adjustment (raise, bonus) tied to performance rating **Common rating scales:** Most companies use 3-5 point scales: Exceeds Expectations / Meets Expectations / Needs Improvement, or numerical 1-5 ratings. The company distribution matters — at some companies, 'Meets Expectations' is an average performer who gets a 3% raise; at others, it means you're on a performance improvement plan. **The compensation link:** Annual reviews are the primary formal mechanism for salary increases. Typical market-of-living adjustments run 2-5%; merit increases for strong performance run 5-10%+; promotions may carry 10-20%+ increases. **Getting maximum value:** - Document your accomplishments throughout the year — don't reconstruct them under pressure - Quantify impact wherever possible - Align your self-assessment language with the criteria in the review rubric - Understand the calibration process (how individual ratings compare across the team or department) **When reviews happen:** Most companies run annual reviews in Q1 or Q4. Some run bi-annual cycles. When evaluating an offer, ask when the next review cycle is — if you join in January and reviews are in October, you may wait 9-10 months for your first raise.
Why it matters
Annual reviews are the formal mechanism by which your salary grows. Understanding how the review process works at a new employer — timing, criteria, and typical outcomes — helps you forecast your compensation trajectory, not just your day-1 salary.
Candidate tip
When starting a new job, ask your manager within the first week what great performance looks like in the first 6-12 months — and write it down. This becomes your annual review preparation document and ensures you're working toward the right outcomes.
Related terms
Base Salary
Offers & NegotiationThe fixed annual or hourly compensation paid to an employee, before bonuses, commissions, or equity. It's the foundation of total compensation and the most directly negotiable component of most job offers.
Total Compensation
Offers & NegotiationThe full value of everything an employer provides — base salary, bonus, equity, benefits, retirement contributions, and perks. Comparing total compensation across offers is more accurate than comparing base salaries alone.
Probation Period
Offers & NegotiationAn initial employment period (typically 30-90 days) during which a new employee's performance and fit are evaluated, often with reduced job protections or easier termination procedures for the employer. Common globally; less formalized in the US.
Salary Negotiation
Offers & NegotiationThe process of discussing and agreeing on compensation with an employer — most critically when negotiating a job offer, but also during performance reviews. Most candidates underestimate their leverage and leave significant money on the table by not negotiating.