Performance Management & Appraisal

Performance Management System (PMS)

• A PMS is a structured approach that assesses and improves employee performance
• PMS sets clear objectives, monitors progress, provides feedback, and aligns individual goals with strategic objectives
• Example: A company using PMS to set quarterly goals for employees, tracking progress with regular check-ins, and providing support

Appraisal Defined

• Appraisal is a formal evaluation of an employee's job performance, skills, and contributions
• Appraisals help determine salary raises, promotions, and areas needing improvement
• Example: An annual appraisal reviews performance and decides on salary increases based on achievements

Steps in the Appraisal Process

• Involves several steps to effectively evaluate and improve employee performance
• Establishment of Performance Standards
• Performance standards define clear, measurable criteria or benchmarks
• Standards are based on job descriptions, organizational goals, and industry standards
• The goal is to create SMART expectations: Specific, Measurable, Attainable, Relevant, Time-bound
• Example: A marketing manager having performance standards to increase website traffic by 20% in six months
• Joint Supervisor-Subordinate Setting of Measurable Goals
• Supervisors and employees collaborate on specific, measurable goals for the appraisal period
• Both parties discuss and agree on targets that align with organizational objectives
• Collaboration promotes ownership and accountability
• Example: A sales representative and supervisor jointly setting a monthly sales increase target of 10%
• Measurement of Performance
• Employee performance is monitored and measured against standards or goals
• It includes quantitative data (sales, production) and qualitative assessments (feedback, teamwork)
• Regular monitoring accurately tracks performance
• Example: Measuring a customer service agent's performance using satisfaction scores, response times, and resolution rates

Performance Comparison and Results

• Compare Performance with Standards
• Supervisors compare actual performance to set standards to identify achievements and gaps
• This highlights strengths and areas needing improvement
• After reviewing sales performance, achieved sales are compared to a 10% growth target
• Discuss Appraisal Results with Employee
• Supervisors provide feedback on achievements, areas for improvement, and necessary adjustments
• It should be constructive, highlighting strengths while addressing weaknesses
• A manager meets with an employee, praising sales goals but noting customer satisfaction improvements

Corrective Action and Performance Appraisal Interviews

• Corrective Action
• When performance doesn't meet standards, corrective actions are initiated
• Actions include training, changes in responsibilities, or closer supervision to support employee improvement
• For example, an employee consistently missing deadlines gets time management training or workload reviewed
• Performance Appraisal Interview
• It is a formal discussion between an employee and manager to review job performance
• It involves feedback on strengths, areas for improvement, and future goals

Sources and Problems in Performance Information

• Sources of Performance Information
• Performance information can come from multiple sources
• Self-assessment: Employees evaluate their performance
• Manager: Direct supervisor overseeing work
• Peers: Colleagues insight into teamwork and collaboration
• Subordinates: Feedback from the employee's team
• Customers/Clients: Valuable feedback, especially in customer-facing roles
• Common Performance Appraisal Problems
• Common issues during appraisals include bias, unclear criteria, infrequent feedback, and the halo effect
• Bias: Manager's personal feelings affect the evaluation (favoritism or leniency)
• Lack of clear criteria: Unclear goals confuse employees about how they are judged
• Infrequent feedback: Relying only on annual appraisals, missing regular feedback
• Halo Effect: One positive trait biases the overall rating

Compensation Overview

• Compensation Defined
• Compensation includes an employee's total payment and benefits for their work
• Direct Compensation: Salary or wage received (hourly, daily, weekly, or monthly)
• Indirect Compensation: Non-cash benefits (health insurance, retirement, bonuses, paid leave, allowances); 13th-month pay in the Philippines
• Purpose of Compensation
• Serves multiple purposes for both the employee and the employer

Compensation Strategies

• Attraction and Retention of Talent
• Competitive compensation attracts and retains skilled workers
• Companies offer higher salaries or additional benefits (company car, healthcare plan) that attract top talent
• Motivation and Job Satisfaction
• Compensation motivates employees to perform better and stay loyal
• Performance-based bonuses encourage employees to meet or exceed targets
• Legal Compliance
• Ensuring compliance with labor laws regarding minimum wage, overtime pay, and benefits (SSS, PhilHealth, Pag-IBIG)

Minimum Wage Factors and Holiday Pay

• Minimum Wage Factors
• Minimum wage rates are determined by various factors
• Cost of Living: Higher cost leads to higher minimum wages (e.g., Metro Manila vs. rural)
• Economic Conditions: It affects minimum wages (GDP growth vs. economic downturn)
• Industry Conditions and Profitability: Industries doing well can afford higher wages
• Productivity and Workforce Skills: Higher-skilled workers command higher wages
• Political and Social Considerations: Advocacy for fair compensation, with labor unions playing a role
• Holiday Pay
• Holiday pay is the compensation for not working on a regular or special holiday, as mandated by law
• Legal Basis: Governed by the Labor Code of the Philippines
• Non-worked regular holidays entitle employees to their regular daily wage
• Computation: Working on a regular holiday results in 200% of the regular rate (regular pay + holiday premium)
• The regular daily wage of ₱500, not working on Maundy Thursday gets ₱500 holiday pay
• Working Maundy Thursday results in ₱1,000 (₱500 regular wage + ₱500 holiday pay)

Premium Pay and Non-Working Days

• Premium Pay Explained
• Premium pay is additional compensation for working during non-regular hours, rest days, or night shifts
• Legal Basis: Covered by the Labor Code of the Philippines, entitling employees to premium pay for rest days or special holidays
• Rate: 130% of daily rate for rest days and 200% for special holidays if worked
• Working on a Sunday (rest day) results in 130% of the regular rate: earning ₱650 with a ₱500 daily wage
• Working on Ninoy Aquino Day (special holiday) results in 200% of the regular rate: earning ₱1,000 with a ₱500 daily rate
• Regular and Special Non-Working Days
• Regular Holidays are declared nationwide and observed by all workers
• Employees receive holiday pay regardless of work, with different rates depending on work status
• Special (Non-Working) Days are holidays where employees aren't required to work but get premium pay if they do
• Non-worked special days do not entitle employees to pay
• Regular Holiday: Independence Day (June 12) not worked gives regular pay (₱500); worked gives 200% (₱1,000)
• Special Non-Working Day: Chinese New Year not worked gives no pay (unless specified by employer); worked gives 130% of daily wage (₱650 for a ₱500 daily wage)

Employee Benefits

• Definition of Benefits
• Employee benefits include additional compensation beyond regular salary, enhancing quality of life, health, and security
• Benefits play a key role in attracting, retaining, and motivating workers
• Types of Benefits
• Health and Medical Benefits: Including health insurance, medical reimbursements, and HMO coverage
• Retirement Benefits: Long-term benefits for financial security after retirement like Pag-IBIG Fund
• Leave Benefits: Paid time off for personal/health reasons, including vacation, sick, and maternity leave
• Bonuses and Allowances: Year-end bonuses (13th-month pay), transportation, and meal allowances
• Insurance Benefits: Including life insurance and accident coverage
• Mandatory Benefits in the Philippines
• Employers must provide mandatory benefits for employee protection and support
• Social Security System (SSS): Social security coverage for sickness, disability, maternity, retirement, and death with employer-employee contributions
• PhilHealth: Government health insurance covering medical expenses, requiring employer-employee contributions
• Pag-IBIG Fund: Savings program for housing, retirement, and emergencies, mandating monthly contributions
• 13th-Month Pay: Additional month's salary for employees working at least one month, typically in December

Leave and Termination

• Maternity and Paternity Leave
• Female employees are entitled to 105 days of paid maternity leave, while male employees can avail of 7 days of paternity leave
• Overtime Pay and Holiday Pay
• Overtime Pay and Holiday Pay: Employees receive this compensation for working beyond regular hours or on holidays
• Promotion
• Promotion is advancement to a higher role with increased responsibilities, salary, and benefits, based on performance, skills, and experience
• Demotion
• Demotion is the reduction of an employee’s rank or position due to poor performance or behavioral issues, involving decreases in salary and responsibilities
• Termination
• Termination is the end of employment due to resignation, layoffs, or dismissals