Q & A – What compensation/rewards are generally connected with performance appraisals?

Q: What compensation/rewards are generally connected with performance appraisals?

A: Most frequently, organizations use the performance management system to tie a pay increase (usually called merit pay) or a performance bonus to how well an employee has performed over the previous review period.  These usually concentrate on what the employee has contributed to the company, what the employee’s objectives and responsibilities were, and how well they were achieved.  They work best when the performance can be assessed against clearly defined job standards and objectives.

In addition, some organizations use performance targets (goals) for incentive pay.  Employees who meet the clearly defined goals receive additional variable pay beyond base salary.