HUMAN RESOURCE MANAGEMENT

Q1) What are types of performance appraisals? Determine any

three of them.
Ans: A Performance Appraisal is a regular review of an employee’s job performance and overall
contribution to a company. It is the most critical human resource practice and an indispensable
part of every company or organization. It is a human trait that every person who is employed by
some company is curious to know about his/her performance details and compare it with their
fellow colleagues and comprehend how they can improve upon it. So every company needs a good
performance appraisal system.
The basic purpose of performance appraisal is to identify an employee’s value and his work output
to the company. The most important factors which are constantly monitored by the management are
– attendance, efficiency, attitude, quality of work, amount of work and dedication towards the
organization. The physical factors like attendance, amount of work, efficiency are frequently
measured by the records maintained by the Human Resource Department. However, to properly
ascertain and judge an individual’s performance, appraisal of both subjective and objective factors
needs to be taken in to account.

How a Performance Appraisal impacts an Organization: The Basic Functions

Some of the important benefits of a performance appraisal are as follows:

 A proper systematic performance appraisal system boosts the managers to properly
identify the performance of employees in an accurate manner. There is no biasness and the
employees are satisfied and highly motivated after this process is completed. They are all
geared up to perform their best to gain a higher rating in their respective organization.

 Performance appraisal helps employees recognize the areas in which they need to
improve. Furthermore, the managers can also use this information to provide effective
criticism of the way employees perform their work.

 It assists by facilitating the mangers with the relevant data with which they are able to
judge an employee for future job assignment and projects. Managers are able to place the
right employee for the right job depending upon their sills in that particular area.

SOME OF THE MOST POPULAR METHODS OF A PERFORMANCE

APPRAISAL
 Forced Distribution Method/ Bell Curve Rating

Forced distribution appraisal method or Bell Curve rating is where the employee falls under a
pre-set performance grades by the upper management. These grades are designed for the
benefit of the organization. Managers must evaluate each employee, usually into one of three
categories, i.e., poor, good, or excellent. Using this method will ensure that a small quantity of
the employees fall under the categories of outstanding performers and poor performers and
most of the remaining staff will fall under the middle of the distribution.

This is one of the most famously used methods and also the most denounced methods. Due to
financial reasons organizations might use this method to avoid increasing the labour costs.
Organizations may also use this method to reward the best performers.

However, if an organization has hired talented employees across the board, the all may have
performed in an excellent manner within their respective departments. Thus, if the manager
forcefully grades such an employee this will immediately effect on the motivation of the
employee. This further can lead to rivalry amongst employees and lower the moral of the
workforce as employees will think they are rated unfairly.
Furthermore, if an employee is not justly judged or rewarded as per his work output, he may
leave the company for greener pastures and a better future. The company will lose a valuable
resource who could be the instigator of higher turnover in the company.
This method is used to create a culture of high performance it is criticized for various and above
mentioned reasons.

360-Degree Appraisal
A 360-degree appraisal is one of the most popular and highly in practice
methods for Performance Appraisal. In this method feedback is acquired from each
individual who comes in contact with him during his working hours. This enlightens the
management about his behavior, personality and attitude. This method would be very useful for
beginners as their actual performance level is unknown in the organization but it also facilitates
for the experienced personnel as it would help the management compare his previous and current
performances. It is very cost effective and free of biases due to diversity of opinions.

Management by Objective (MBO)

MBO (management by objectives) methods of performance appraisal are rather
interactive and fair form of appraisal and they are cost effective and results- oriented. The
technique involves setting up of objectives and goals for the employee either by the
employer, or his manager, or both of them. The employee is thus judged according to his
performance in task completion and quality of task achieved. This helps the employee to
perform to the best of his abilities, because he knows what is at stake, i.e. his goals, his
future aspirations. He is clearly aware and already knows the quality and quantity that needs
to be delivered.

Q2) What are the components of salary, benefits and wages?

Ans: The term Salary signifies any consideration given to an employee by his employer.
Any
income is known as salary if the relationship between Payer and Payee is that of
Employer & Employee.
The breakup of Salary
There are 9 components of a salary namely
1) Basic Salary
2) House rent allowance (HRA)
HRA Exemption allowed will be least of the following: 
 Actual HRA Received
 Actual Rent paid reduced by 10% of Salary
 50% of basic salary in-case where the taxpayer is residing in a metro city.
 40% of basic salary in-case where the taxpayer is living in a non-metro city.

3) Conveyance Allowance
4) Leave Travel Allowance (LTA)
5) Medical Reimbursement
6) Special Allowance
7) Bonus
8) Employee contribution to Provident Fund
9) Professional Tax – Professional tax

The major components of an employee's wage are:

 Basic Pay.
 Dearness Allowance (D.A.)
 Incentive.
 Fringe benefits.
 Annual statutory bonus

The 5 most common benefits

 Health insurance. After salary, this staple benefit is of the utmost importance to many job

candidates and typically includes medical coverage for employees and their families. ...

 Paid time off. ...

 Dental insurance. ...

 Retirement savings plans. ...

 Vision insurance.

Q2) Why salary and compensation is one of key factors in staff retention?
Ans: Employees want to be paid well for the job they do, both for their self-esteem and as a
practical means to living. The importance of compensation in employee retention depends
 somewhat on the type of job and industry. A financial planner or stock broker, for example, often
is more concerned about compensation. Compensation includes not only salary, but also benefits
and other perks.
Factors that influence Employee Retention:
 Ability to do what they do best. ...
 Work-life balance & personal well-being. ...
 Greater stability and job security. ...
 Significant increase in income. ...
 Great company brand reputation.

Equity
Employees typically consider their salary to be the primary motivation to come to work. Other
factors that positively influence job retention include flexible work schedules, training
opportunities and other amenities, such as bonuses or extra vacation time. However, if an
employee feels that she works harder than another employee who receives a higher rate of
compensation, she may leave for a higher paying opportunity. Highly paid employees tend to be
more motivated to remain in their jobs.

Keep Salaries Competitive

Regardless of a person's field, he/she wants to know his/her compensation is competitive with
what others who perform similar work are earning. Salaries need not be the highest in your area
but should be among the top. Paying low salaries means top people will leave and low
performers will take their jobs.

Raises, Bonuses and Awards

Raises are an excellent way to keep employees, especially in times when many companies aren't
giving them. The more significant the raise, the more appreciated the employee feels. If you have
a small amount to award for raises, consider giving more to your top performers. If you can't
afford to increase salaries, give bonuses instead. They go a long way toward showing
appreciation without locking the company into higher salaries. Contests and awards for
performance also reward high achievers while increasing morale and enthusiasm.

Tying Compensation to Retention
In addition, performance-based bonuses motivate employees in terms of aligning their individual
goals with company goals. Implementing incentives such as stock options, profit sharing and
spot rewards are other ways compensation affects retention.

Why Employees Leave

Managers believe people leave their jobs due to compensation, but 88 percent of employees
actually leave for other reasons. Branham says the seven hidden reasons are: the job not being as
expected, people not being a good fit for the job, too little support or feedback, little opportunity
for growth, feeling unappreciated, stress and overwork, and loss of confidence in management.
Resolving these common problems can keep employees satisfied in their jobs so they are more
likely to stay.