The majority of employees in the labor force are under a merit increase pay system, though most of their pay increases result from seniority and other factors. This approach involves periodic review and appraisal of employee's performance.
When designing the plan of action, consider:
Who will be involved in the solution?
How will they participate?
Who will be affected by the solution?
How will they be affected?
What course of action will be taken?
How should this course of action be presented to employees, clients, suppliers, and others?
When will the action start and be completed?
Where will this action happen?
How will this action happen?
What's needed to make it happen?
An effective employee appraisal plan improves two-way communication between the manager and the employee, relates pay to work performance and results, and helps employees understand job responsibilities and expectations and areas for improvement. An employee appraisal plan also provides a standardized approach to evaluating job performance.
Such a performance review helps not only the employee, but also the manager, who can gain insight into the organization. An open exchange between employee and manager can show the manager where improvements in equipment, procedures, or other factors might improve employee performance. Try to foster a climate in which employees can discuss progress and problems informally at any time throughout the year.
To get the best results, use a standardized written form for appraisals. An appraisal form should cover the results achieved, quality of performance, volume of work, effectiveness in working with others in the firm and with clients and suppliers, in initiative, job knowledge, and dependability. Employment services, trade associations, and some office supply stores can provide standardized performance appraisal forms.
To keep your pay administration plan in tune with the times, you should review it at least annually. Make adjustments where necessary and don't forget to retrain supervisory personnel. This isn't the kind of plan that can be set up and then forgotten.
During your annual review, ask yourself if the plan is working for you. That's the most important question. Are you getting the kind of employees you want or are you just making do? What's the employee turnover rate? Do employees seem to care about the business? Most importantly, does your pay administration plan help you achieve the objectives of your business?