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Performance Management Policy

Human Resources [HRP]Performance Management Policy
Last Revision Date

“ Insert Date”


Document Summary
Title: Performance Management Policy
Policy Owner: “Policy Owner Name”
Effective Date: “Effective Date”
Supersedes: “Date of the previous version”
Approved By: “Name & Title of the approving authority”
Policy Level: “On the basis of policy applicability”


1     PURPOSE.. 6

2     SCOPE.. 6


4     APPRAISAL. 10





9     GLOSSARY.. 16


11       REVISION LOG.. 17

12       APPENDIX A.. 17

1      PURPOSE

           The purpose of the Performance Management Policy is to facilitate and promote the achievement of individual and company targets through the effective management of employee performance.

2      SCOPE

The policy is applicable to all employees of “Your Company Name” and the sub-companies across all locations.


3.1     Objectives

The policy document has been drafted keeping the following objectives in mind;

3.1.1    To enable the achievement of individual objectives with the help of clearly defined KRAs, KPIs & Competencies in alignment with the company objectives.

3.1.2    To provide an integrated policy framework for measuring employee performance.

3.1.3    To provide a structured approach for identification of performance obstacles and developmental needs of all employees.

3.1.4    To serve as a guideline for variable payout and employee promotion.

3.2     Applicability

This policy is applicable for all permanent and probationary employees working on the payrolls of “Your Company Name” and its sub companies.

For temporary staff (Trainees – off rolls) the principles of this policy will be directional and shall be applied as deemed appropriate by the HRD on the basis of nature & terms of employment.

3.3     Introduction to Performance Management

3.3.1    Performance management helps the employees’ gain clear understanding of their;

–       Goals referred as KRAs (Key Result Areas),

–       Success matrix referred as KPIs (Key Performance Index),

–       Skills commonly referred as Competencies.

Clearly defined performance matrix help the employees & the teams to focus and achieve their term goals more successfully.

3.3.2    Fundamental to this approach is:

 i.    Organization Goals: An agreement between the Management team and the HOD about what is to be achieved, to what standard, how and by when, by setting clear organizational objectives.

 ii.    Individual KRA, KPI & Competencies:  An agreement between the staff member and the manager in relation to key responsibility areas and competencies is required to achieve these objectives and gain support from the manager.

 iii.    Performance Review: Regular, joint review of progress against the above to ensure continual improvement of performance.

3.4     “HRMS Name” PMS

3.4.1    The “HRMS Name” shall be used as the performance management system tool for setting individual goals (Objectives), performance evaluation (review) and appraisals.

3.5     PMS Cycle

3.6     Individual Goal Setting

3.6.1    All employees are expected to fill and submit their goal sheets as per the deadlines defined in the “HRMS Name” PMS modules or as communicated by the HRD over announcement emails.

3.6.2    The Goal or Objective Sheet shall explicitly mention the individual’s Key Responsibility Areas (KRAs), the corresponding Key Performance Index (KPIs) and the core competencies required to achieve individual and department targets.

3.6.3    The goals and objectives of each employee should be divided in at least 3 KRAs and 2 core competencies against which his/her performance shall be measured upon the completion of the review period.

3.6.4    It is the duty of the line managers to ensure that all the new joiners have filled their objective sheets for the given quarter or half-year within 45 days from the date of joining the organizations.

3.6.5    Managers are advised to keep quarterly or half-yearly objective cycles in sync with the review and appraisal cycles.

3.6.6    Objectives setting timelines (tentative)

Steps Meetings / Actions Timeline
Step 1 Organization Goal Setting (Mgmt.) “Enter Timeline”
Step 2 Department & Team Goal Setting

(HOD & Mgmt.)

HRMS Enter Timeline”
Step 3 Sharing Team Goals (with HRD) “Enter Timeline”
Step 4 Update Individual Objective sheets in HRMS (by HRD) “Enter Timeline”
Step 5 Objective Sheet Approval

(by employee & RM)

“Enter Timeline”

3.7     Performance Review

3.7.1    “Your Company Name” follows half-yearly reviews cycle for performance evaluation of its employees which are conducted in October and April after completion of 6 months’ review period (H1 & H2).

3.7.2    A 2-tier performance evaluation system shall be followed comprising of;

–       Step 1) Self-Evaluation: The employee shall evaluate himself/herself on the basis of perceived individual performance and rate himself/herself.

–       Step 2) Manager Evaluation: The Reporting Manager (RM) shall re-evaluate employee rating, conduct review discussion and assign final rating. The final rating should be mutual and should be agreed upon by Employee, RM and HOD.

3.7.3    An employee is expected to complete the self-assessment during the first 07 days of the month succeeding the quarterly or half-yearly review/assessment period.  Thereafter, the reporting manager shall take another 10 days to have review discussion with employee & HOD to assign final ratings.

3.7.4    The review period shall be closed by 30th of the month and rating shall freeze and remain unchanged thereafter.

3.7.5    Performance Rating Table;

Performance Rating Performance %ages
EP – Exceptional Performance >101%
VGP – Very Good Performance 91%-100%
GP – Good Performance 76% – 90%
DP – Developing Performance 61% – 75%
NMP – Not Meeting Performance <=60%

3.7.6    Half-yearly review timelines (tentative)

Steps Review Process H1  Review


H2 Review
Step 1 Self-Evaluation (by Employee) “ Enter Timeline” “ Enter Timeline”
Step 3 Manager Evaluation (by RM) “ Enter Timeline” “ Enter Timeline”
Step 4 Final Rating Assignment (by HOD) “ Enter Timeline” “ Enter Timeline”
Step 6 Final Rating Report Generation

(by HRD)

“ Enter Timeline” “ Enter Timeline”

3.8     Underperformance & Performance Improvement Plan (PIP)

3.8.1    Employees have undeniable responsibility to perform to a satisfactory level. If an employee is found performing less than the satisfactory performance level due to misconduct (e.g. negligence or lack of interest) on the part of the employee, then the Disciplinary Procedure will normally initiate.

3.8.2    Underperformance may also be due to lack of the required knowledge, skills or ability rather than misconduct. In such a scenario, the employee shall be placed on PIP and would be given support and reasonable time to achieve the required standard.

3.8.3    Employees receiving DP (Developing Performance) rating shall be coached and counselled by the line managers and HOD to understand the underlying reason for low performance. The HOD will recommend necessary trainings if necessary to improve the employee’s performance.

3.8.4    Employees receiving NMP (Not Meeting Performance) rating during the annual appraisal shall be placed on PIP by default and shall be provided 03 months’ time period to improve their performance.

3.8.5    If the incumbent does not score over DP rating in the next performance review or scores below 60% performance mark as per targets/tasks assigned during PIP; then the company reserves the right to take necessary corrective action upto termination.


4.1.1    The financial calendar year i.e. (01st April, Current Year to 31st March, Next Year) shall be used as the appraisal cycle for all business units and offices across “Your Company Name”

4.1.2    Employees having spent more than at least 06 months in the organization (those who have joined before 1st October); shall stand eligible for appraisals for the given year.

4.1.3    Employees joining the organization post 1st October shall be eligible to for appraisal in the next appraisal cycle and shall be appraised on the pro-rata basis.

4.1.4    The appraisal process shall be initiated by the HR department using HRMS (PMS) in last week of March and shall be completed by the 3rd week of April.

4.1.5    The appraisal shall be based on the final aggregate rating received during the H1 and H2 review period.

Performance Rating Performance %ages
EP – Exceptional Performance >101%
VGP – Very Good Performance 91%-100%
GP – Good Performance 76% – 90%
DP – Developing Performance 61% – 75%
NMP – Not Meeting Performance <=60%

4.1.6    The revised or appraised salary shall be effectively paid from 01 April of the given year.

4.1.7    No appraisals shall take place outside the appraisal period expect in case of promotion, change in role, transfer or market correction. All such exceptions shall take place with the consent of the HR Head and the Directors.

4.2     Promotion Guidelines

4.2.1    In order to stand eligible for a promotion the employee needs to fulfill the below criteria;

From To Tenure(from Previous Promotion) Performance Rating Role Certification Mgmt.


G3 G2 03 yrs. EP

(last 3 yrs)

NA Team Size : +15 Yes Yes
G4 G3 03 yrs. VGP

(last 3 yrs)

NA Team Size : +10 Yes Yes
G5 G4 02 yrs. VGP

(last 3yrs)

NA Team Size : +5 Yes NA
G6 G5 02 yrs. VGP

(last 2 yrs)

NA Team Size : +3 Yes NA
Same Same 02 yrs. VGP

(last 2 yrs.)


4.2.2    The tenure applicable for promotion shall be counted from the previous date of promotion (or) date of joining whichever was earlier.

4.2.3    Same grade promotion to higher job roles too require at least 02 years of service with VGP rating for last 02 consecutive years.

4.2.4    Promotion from G4 level upwards will require HOD recommendation and Management approval in addition to the above mentioned criteria. And G3 to G2 will require the incumbent to have significant business impact, leadership skills and high recommendations.

4.2.5    The HRD and Management team reserves the final right to promote or revoke any promotion if deemed necessary for business growth and company well-being.

4.2.6    For certain promotions, training or certification is a necessary pre-requisite. To know this in detail, you may get in touch with the training SPOC in the HRD.


5.1     For On-Roll Employees

5.1.1    On-roll employees who have completed 06 months from date of joining and have a GP performance rating or with performance score >76% will stand eligible for confirmation.

5.1.2    Employee on active PIP or with recorded behavioral or disciplinary issues will not be eligible until they complete PIP successfully or can get NOC from their HOD.

5.1.3    Employee whose services stands confirmed will not be eligible for salary increment unless explicitly mentioned in the offer letters issued at the time of hiring.

5.1.4    The confirmed employee will be eligible for appraisal as per the company standard appraisal cycle.

5.1.5    In case, the performance of an employee is found to be substandard or the employee has guilty of disciplinary issues at the time of confirmation; then the employee shall be placed on PIP for extended probation period ranging from 01 to 03 months.

5.1.6    The employee’s probation in such case will be extended on “HRMS Name” and he/she will receive a probation extension email/letter.

5.1.7    As an equal opportunity employer “Your Company Name” does not believe in discriminating between probationary and permanent employee. Hence, the probationary employee enjoys most benefits of permanent employee like Health Insurance, Accidental Death Insurance cover and Leaves. However, EL can only be availed once confirmed.

5.2     For Off-Roll Trainees

5.2.1    Off-roll employees (Trainees) who have completed 06 months from date of joining and have a GP performance rating or with performance score >76% will be taken on payroll.

5.2.2    Trainees with substandard performance, recorded behavioral or disciplinary issues will not be taken on payroll and will simply be issued a training certificate and will be required to leave at the end of their training term.

5.2.3    All Trainees are required to undergo and successfully clear the mandatory certification program before being inducted as a full-time employee.

Department Certification / Test Timeline
Enter Department Name Enter Certification Name Within 06 months

5.2.4    In case, the certification is company funded then the Trainee is expected to sign a “Enter number of years” of service agreement to pledge his/her loyalty to the company upon successful completion of the certification.

5.2.5    Should the Trainee fail in company funded certification test; then in such case the Trainee will be liable to bear the certification cost as liquidity damages.

5.2.6    Respective RM/HOD are required to initiate the certification request to “Enter Contact Person Name” in HRD team by 1st week of 5th month with prior employee consent.

5.2.7    Upon fulfilling the induction criteria and successful certification the Trainee will be absorbed as a full time employee with an entry level salary applicable for the concerned department at the given time.

5.2.8    The trainee will be absorbed as a full time on-roll employee but will still be required to clear the probation period in order to become a permanent employee.


6.1     Variable Payout

6.1.1    Employees having a variable component as part of their CTC as mentioned in offer letter shall stand eligible to receive variable pay-out.

6.1.2    The variable component is a performance linked payout which shall be paid on the basis of the half-yearly performance rating of the employee for the given review period.

6.1.3    The variable payout shall be paid on the half-yearly basis. The period from 01 April to 30 September and 01 October to 31st March shall be called H1 and H2 respectively.

Half-Year Period Payout
H1 01 Apr to 30 Sep In October Salary
H2 01 Oct to 31 Mar In April Salary

6.1.4    The variable payout for the H1 period shall be paid along with the October salary and H2 along with the April salary respectively.

6.1.5    The variables shall be paid as per the payout percentage defined in the table below;

Performance Rating Variable Payout Percentage
>100% 100%
80% – 100% As per Actual
76% – 80% 61% – 70%
71% – 75% 51% – 60%
61% – 70% 41% – 50%
<60% Not Eligible

For Example, if an employee has an annual variable amount of Rs.1,20,000/- per annum and his/her performance rating for H1 is 80% and 70% for H2.

Then his Variable Pay-out Calculation would be:

Payout for H1:

  • Variable Amount = 60,000/- (half-yearly)
  • Performance Rating = 80%
  • Payout Percentage = 80% (corresponding to performance rating)
  • Payout Calculation = 80% x 60,000
  • Variable Entitled = Rs.48,000/-

Payout for H2:

  • Variable Amount = 60,000/- (half-yearly)
  • Performance Rating = 70%
  • Payout Percentage = 50% (corresponding to performance rating)
  • Payout Calculation = 50% x 60,000
  • Variable Entitled = Rs.30,000/-

6.1.6    For some employees, the variable payout disbursal will be as per the HRD communication.

6.1.7    The above mentioned variable payout percentages can be changed with/without prior notice with the directions of the HRD or the management team.


6.2     Reporting and Controls

6.2.1      An employee shall be responsible for the timely completion of the objective/goal sheets and self-evaluation.

6.2.2      HRMS (PMS) module shall be used as the performance management system for capturing objectives, reviewing performance and conducting appraisals.

6.2.3      Post self-evaluation the objective sheet shall be submitted to next line manager for his/her rating and approval.

6.2.4      The reporting manager reserves the discretionary rights to approve or reject employee rating if they disagree with the rating given. However, the Managers are advised to apply jurisprudence in exercising their decisions.

6.2.5      The line manager shall have a discussion with the employee before assigning manager rating which has to be backed by reasons and supporting evidences. It is mandatory that the “manager rating” has to be unanimously agreed upon by both the employee and line manager.

6.2.6      Any dispute with regards to the final rating shall be referred to HR team (Talent Management). The decision of the HRD can’t be challenged and shall be deemed final.

6.2.7      Any discrepancies in ratings or evaluation process need to be informed to the HR department (Talent Management) for review and correction.

6.2.8      Any issues with the employee self-service portal (HRMS tool) needs to be escalated to “HRMS Name” implementation team at “Enter email ID” or can be shared on the feedback section in the HRMS tool.

6.3     Governance

6.3.1      The Policy shall be governed by the HR department (Talent Management team).

6.3.2      The verdict of HRD on any disputes or issues with regards to performance ratings and payout percentages shall be deemed final.

6.4     Exceptions

6.4.1      No exceptions shall be made in the policy unless the policy is revoked by the HRD or the Managing Director.

6.4.2      Any exceptions in this policy can only be approved by Head HR along with consent of the Managing Director.


Role Responsibilities
Employee Individual employees are responsible filling objective sheets and self-evaluation.
Line Manager The People Managers are responsible for assigning KRAs, core competencies and ensuring the objective sheets are timely completed. They are also responsible for timely performance evaluation and providing necessary feedbacks, recommending training and PIP where deemed necessary.
Human Resources HR Department is responsible for managing PMS, disputes, escalations, facilitating necessary training and issuing PIP.


8.1.1   For purposes of this policy, the terms used are defined as follows:

Term Definition
KRA KRAs stands for Key Responsibility Areas. These directly follow from the job description of a person and represents the areas in which he or she is expected to perform.
KPI A key performance indicator (KPI) is a business metric used to evaluate how effectively an individual is achieving key business objectives (KRAs).
Competency A cluster of related abilities, knowledge, and skills that enable a person to act effectively in a job. Competence indicates sufficiency of knowledge and skills that enable a person to perform his job effectively.
Appraisal Cycle Financial calendar year. 01 April to 31March
Objective Cycle Half-yearly or Quarterly
Review Cycle Half-yearly or Quarterly


Reference Link
“Reference to previous policy” drafted by “Employee Name”. “Attach below in Appendix”


Rev Description of Changes Changed By Approved By Date
1.0 “Highlight section of policy impacted” “Employee Name & Title” “Management Name & Title” “Mention Date”


“Attach related policies & procedures”