How Can I Improve Our New Performance Appraisal System and Salary Structure? Seeking Advice!

I am working in a Fabrication and Erection company for the past 3 years. For this year, I have taken the initiative to start Performance Appraisals.

Previously, I used to make a list of the staff, and two of the directors would increase the staff salary by 1000/2000/5000, etc., and promotions were also given. Now, I have started the Performance Management System (PMS) by using a rating system.

I made a site-wise list and sent it to all site in-charges to rate the employees. After receiving the ratings from the site in-charges, I forwarded them to the reviewing officer. Then, I made one consolidated list, which I will be giving to the management committee. The management committee will be doing the final ratings.

I have fixed the percentage of the increment as follows:
- 0 to 1: 0%
- 2 to 3: 5%
- 4 to 5: 10%
- 5 to 6: 15%
- 6 to 7: 20%
- 8 to 9: 30%
- 10: 40%

Questions and Concerns

1. I have explained to you all how I implemented the PMS, but I would like to know from all of you if this will work?

2. We work on Gross Salary and don't have a CTC system. I would like to organize our compensation. Our salary structure is based on gross salary, for example, a 20,000/- gross salary is divided as follows:
- Basic = 35% of GS
- Company Allowance = 25% of GS
- Education Allowance = 5% of GS
- Conveyance Allowance = 10% of GS
- HRA = 25% of GS

I want to ask if this structure will help achieve a higher salary for tax purposes?

3. Now, management has decided to give 12k to BE freshers, whereas previously we used to give 8k. My question is, if we give 12k to freshers, then for our engineers who are working with 1 year of experience and have a 10k salary, how do we fill this gap?

Please guide me.

Regards,

Dear Khusro Patel,

Firstly, it’s good to note that you have started Performance Appraisals in your company, but it seems there is confusion between Performance Appraisal and Performance Management System. The former is a part of the latter.

Understanding Performance Management System (PMS)

Performance Management System (PMS) includes identifying Key Performance Indicators (KPIs) for your business, setting Key Result Areas (KRAs) for every department/position, and then measuring the performance. Giving salary increments is the final part of it.

There was an extensive discussion on PMS earlier. Please click the following link and read all the posts by various members (including my three posts): https://www.citehr.com/259167-pms-workers.html

To understand the practices of PMS, click the following link: https://www.citehr.com/278588-pms-pr...ml#post1255255

Thanks,

Dinesh V Divekar

Dear Seniors,
It is almost 15 days no reply from any senior. no one can reply or help me.

I wonder why you chose a steep curve! What does a person that gets a rating of between 7 and 8 get? It is always a dilemma when existing staff get less than new starters. It happens all the time. I am no HR expert. Have a lovely day. Simhan A retired academic in the UK.