Unit 4: Performance appraisal, compensation & industrial relations
Human Resource Management notes · PTU syllabus (BBA 402-18)
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Unit summary
Employees expect fair assessment and fair pay. This unit covers performance appraisal — its process, methods and problems — wage and salary administration, methods of wage payment, incentive plans and fringe benefits, and the concept of industrial relations.
After this unit you can
- Explain the performance appraisal process and methods
- Identify problems in appraisal
- Explain wage and salary administration and incentive plans
- Explain fringe benefits and the concept of industrial relations
PTU syllabus topics
- Meaning and process of performance appraisal
- methods and problems
- wage and salary administration
- elements and methods of wages
- incentive plans and fringe benefits
- meaning and concept of industrial relations
Traditional
Ranking, paired comparison, rating scales
Critical incidents
Record of key good and bad events
BARS
Behaviourally anchored rating scales
MBO
Judged against agreed goals
360-degree feedback
Boss, peers, juniors and customers
Topic 1
Performance appraisal
Performance appraisal is the systematic evaluation of an employee's performance and potential for development.
- 1
Set performance standards
- 2
Communicate standards
- 3
Measure actual performance
- 4
Compare with standards
- 5
Discuss results with the employee
- 6
Take corrective action and plan development
| Method | Description |
|---|---|
| Ranking / paired comparison | Employees ranked against each other |
| Graphic rating scale | Rating on traits from poor to excellent |
| Critical incidents | Record of notable good and bad behaviour |
| Checklist and forced choice | Statements ticked by the rater |
| MBO | Performance against jointly set goals |
| 360-degree feedback | Feedback from superiors, peers, subordinates and customers |
| BARS | Behaviourally anchored rating scales |
Problems: halo effect, leniency or strictness, central tendency, recency effect, personal bias and unclear standards.
Topic 2
Wage and salary administration
The aim is fair, competitive and motivating pay. Components: basic wage, dearness allowance (DA), incentives and fringe benefits. Pay is set through job evaluation (ranking, grading, factor comparison, point method), wage surveys and negotiations.
- Time rate: pay per hour, day or month — simple and secure.
- Piece rate: pay per unit produced — rewards output.
Topic 3
Incentive plans and fringe benefits
Individual
Piece rate, Halsey, Rowan, commission
Group
Team bonus, gain sharing (Scanlon)
Organisation-wide
Profit sharing, ESOPs, bonus under the Bonus Act
Fringe benefits are extra benefits besides wages: provident fund, gratuity, insurance (ESI), medical care, paid leave, canteen, transport, housing and education support.
Topic 4
Concept of industrial relations
Industrial relations (IR) refers to the relationship between management and employees (and their trade unions), with the government as a third party. Good IR brings industrial peace, higher productivity and fewer strikes and lockouts. The main actors are employers, employees and unions, and the government.
Key terms
- Performance appraisal
- Systematic evaluation of employee performance
- 360-degree feedback
- Appraisal from all around the employee
- Job evaluation
- Determining the relative worth of jobs
- Fringe benefits
- Benefits given in addition to wages
- Industrial relations
- Relationship between management, employees and government
Quick revision
- Appraisal methods: ranking, rating scales, critical incidents, MBO, 360°, BARS.
- Problems: halo, leniency, central tendency, recency, bias.
- Time rate vs piece rate; individual, group and organisation incentives.
- IR actors: employers, employees/unions, government.
Important exam questions
Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).
Short-answer questions
- Q1.Define performance appraisal.
- Q2.What is 360-degree feedback?
- Q3.List three problems in performance appraisal.
- Q4.Differentiate between time rate and piece rate.
- Q5.What are fringe benefits?
Long-answer questions
- Q1.Explain the performance appraisal process and its methods.
- Q2.Explain wage and salary administration and methods of wage payment.
- Q3.Explain incentive plans and fringe benefits.
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