Unit -4

Q. What do you mean by performance appraisal? Discuss the objectives of performance

appraisal.

Ans:- Performance appraisal is defined as a process that systematically measures an

employees personality and performance usually by managers or immediate supervisors against
the predefined attributes like skillset, knowledge about the role, technical know-how, attitude,
punctuality and so on.

The objectives of performance appraisal are discussed below:

1. This is an essential first step towards promoting an employee, based on the subjective and
objective factors- performance and competency.

2. To provide confirmation to those employees who were recently hired and are on their
probation period.

3. To take a concrete decision what should be the percentage of hike in the salary of an
employee based on the work done by them.

4. To encourage a proper feedback system between the manager and employees.

5. To help employees understand where they stand in the current year and what is the scope of
improvement.

Q. Discuss the modern methods of performance appraisal.

Ans.:- the modern methods of performance appraisal are discussed below:

1. Assessment Centre Method: As a part of the Assessment Centre Method, employees’

performances are evaluated to bring out their potentiality, further allowing a systematic
placement in key departments. The interpersonal abilities, intellectuality, career setting goals,
motivation and the ability to plan and organize are determined through this process.

2. Behaviorally Anchored Rating Scale (BARS) Method: BARS method helps in determining the
key areas in the performance of an employee, suggesting areas of improvement to build the
steps to achieve goals. As a part of the performance management, employees have a
predefined behaviour recorded with the organization for effective performance.

3. Human Resource Accounting Method: This method takes employees as assets evaluating
their performance in monetary terms. Performance appraisal is analyzed based on the cost
incurred and contributions provided by the employees, where contribution should remain higher
than the expenditure incurred on the employees.

4. Psychological Appraisal Method: As a part of this method, psychological tests are conducted
to determine the prospects of the employees instead of their past work analysis.
5. Management by Objectives: The MBO method originally proposed by Peter Drucker is
implemented for setting goals for ultimate success. Setting smart enough goals can analyze the
performances in line with the predetermined goals for better productivity. Douglas McGregor
added to the concept defining the confined reach of the traditional methods setting goals
examples for the organization as a whole.

6. 360 Degree Method: In the 360 Degree Method, an employee’s performance evaluation
surveys are conducted on colleagues, managers, subordinates and customers keeping their
identities anonymous.

Q. Discuss the importance of performance appraisal.

Ans:- the importance of performance appraisal are discussed below:-

1. Assessment of Employee Performance: Performance appraisal helps supervisors to assess

the work performance of their subordinates. The strength, weaknesses and potentialities of
employees, level of performance are disclosed through performance appraisal.

2. Improvement of Performance: The performance of employees are continuously scanned and

reviewed. This creates a psychological pressure on employees to perform well, as well as
motivates the employees.

3. Designing Training and Development Programme: Performance appraisal helps in designing

training and development programme for the employees. Training and development programme
are designed considering the existing skill, knowledge, capability and performance of the
employees as disclosed by performance appraisal.

4. Determination of Pay:Often the pay structure of employees is linked to performance of

employees and their productivity. Bonus and increment of salary is determined on the basis of
performance of employees.

5. Decision Regarding Promotion and Transfer: Performance appraisal helps in decision making
regarding promotion and transfer. Performance appraisal on a continuous basis helps to
evaluate the improvement of employee performance, their skill, knowledge, capability so that
they can be allotted a new job.

Q. What do you mean by compensation? Discuss the objectives of compensation.

Ans.:- Compensation is defined as the consolidated amount, allowances received and various
other kinds of benefits and services which are offered by the organisation to their employees. In
other words, compensation refers to all forms of financial returns, services and benefits
received by the employees from their organisation as a part of their employment relationship.

The objectives of compensation are discussed below:

1. To attract competent and qualified persons towards organization by offering fair wage and
incentive.

2. To retain present employees by paying competitive remuneration.

3. To establish fair and equitable remuneration so as to avoid pay disparities.

4. To improve production, productivity and profitability of the organization.

5. To minimise un-necessary expenditure and to control cost through a device of internal check
and establishment of standard.

6. To improve and maintain good human relation between employer and employee through a
process of payment of bonus, profit sharing and other fringes benefits.

7. To enhance the name and fame of the company through a proper system of wage payment.

Q. What is meant by job evaluation? Discuss the process of job evaluation.

Ans:- Job evaluation can be defined as a systematic process designed to determine the relative
worth of jobs within a single work organisation.It is the process whereby an organisation
systematically establishes its compensation programme.

The steps followed for job evaluation are discussed below:

1. Job evaluation can be defined as a systematic process designed to determine the relative
worth of jobs within a single work organisation.It is the process whereby an organisation
systematically establishes its compensation programme.

2. Selecting compensable factors:Compensable factors are the factors the organisation

chooses to reward through differential pay. The most typical compensable factors are skill,
knowledge, respon sibility, and working conditions.

3. Evaluating job using certain methods:There are four fundamental methods of job evaluation.
The job should be evaluated on the basis of certain methods which should make the evaluation
on scientific way.

4.Assigning pay to the job:The end product of a job evaluation exercise is a hierarchy of jobs in
terms of their relative value to the organisation. Assigning pay to this hierarchy of jobs is
referred to as pricing the pay structure.

Q. Discuss the different methods of wage payment to the employees.

Ans:- there are different methods of wage payments . These are discussed below:

1. Time Rate System:Time rate system is the simplest and oldest method of wage payment.
According to this system, the workers are paid in accordance with the time spent on the job.
The time may be on hourly, daily, weekly, fortnightly or monthly basis. The work or production
done by an employee is not taken into consideration.

2. Piece Rate System: Piece rate system is a system in which wages are paid in accordance with
the number of units of work produced. This is independent of time spent on the job. A fixed rate
of wage is paid for each piece of unit produced.

3. Combination of Time and Piece Rate System: In this system, both time and product are taken
into consideration. The minimum weekly wages are fixed for every worker, which are to be paid
irrespective of his output during the week, provided he has worked for full working hours
required in a week. The wages for the period of his absence are deducted from the total amount
of his wages.

Q. What do you mean by fringe benefits?

Ans:- Fringe benefits are additions to compensation that companies give their employees. Some
fringe benefits are given universally to all employees of a company while others may be offered
only to those at executive levels. Some benefits are awarded to compensate employees for
costs related to their work while others are geared to general job satisfaction.