Accurate performance evaluations help managers promote the right employees. Performance evaluations also help determine pay increases and bonuses for employees. When employers link performance evaluation to pay raises and promotion, it shows that they distribute compensation on a fair and credible basis. For example, if your company has a 5-point rating scale, your policy might be that employees whose performance ratings are below 3 are not eligible for a salary increase; if the rating is at 3, they get a 1% pay increase; if at 4, a 2% pay increase; if at 5, a 3% pay increase.
