The Importance of Performance Appraisal:

to reproduce labor. Salary is the main source of income for workers and civil servants.

In addition, they also receive social benefits during maternity leave, illness, work accidents, and bonuses. So what is a bonus? Bonusis a sum of money or other equivalent that an employee receives for achieving good work performance.

5.2. Salary policies:

a) Salary policy ensures external competitiveness : Enterprises must ensure competitiveness outside the enterprise. What salary will members of the enterprise receive compared to other enterprises for the same type of work? In essence, this is a comparison of the salary of one's enterprise with the salary of other enterprises for the same type of work. Competitiveness is reflected in two points: the salary offered must be high enough to attract and retain employees and that salary must allow the enterprise to maximize production and business performance. This policy also depends on the enterprise's view on salary. To be competitive, enterprises must balance other remuneration conditions. 4

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b) Salary policy ensures internal fairness : Enterprises try to ensure fairness within the enterprise. In essence, it is a comparison of salaries paid for different types of jobs within the same organization. This salary depends largely on the nature and content of the job. The basis for comparison is the job within the same organization, not the person performing the job. This policy is reflected in the enterprise's salary structure. The salary structure shows the salary relationship between different types of jobs within the same organization. Different jobs with different levels of contribution to the enterprise are also paid differently. 5

c) Salary policy ensures employee contribution : Business leaders ask the question: with the same type of work, how will employees be paid? The nature of this policy is to compare the salaries of other individuals.

4. Master Nguyen Van Diem, Associate Professor, Dr. Nguyen Ngoc Quan (2004), "Human Resource Management Textbook", Labor and Social Publishing House - Hanoi, page 203.

5. Master Nguyen Van Diem, Associate Professor, Dr. Nguyen Ngoc Quan (2004), "Human Resource Management Textbook", Labor and Social Publishing House - Hanoi, page 203.

together doing the same type of work. The basis for paying salaries for the level of contribution of different employees is the level of work completion and seniority. Business leaders need to consider the form of salary payment (secret or public payment) and the method of salary payment (lump sum or separate payment) 6

In general, a salary policy that ensures internal cohesion must be a top priority. A policy that ensures external competitiveness only applies to jobs that are extremely scarce in the labor market. However, each stage of development and depending on the individual's ability, the enterprise will choose an appropriate salary policy.

5.3. Job evaluation:

Job evaluation is the systematic determination of the relative worth or value of each job in an organization with the basic purpose of establishing an equitable pay structure. 7

The condition for a successful evaluation program is that the enterprise must build a system of complete and detailed job descriptions and establish a job evaluation board consisting of people who are knowledgeable about the job. The result of job evaluation is that the evaluation board will come up with a hierarchy of job values.

The four main methods for conducting job evaluation are:

a) Ranking is a method of ranking (ordering) jobs from high to low in value, mainly based on feelings. This method has the advantage of being fast and simple, but the disadvantage is that it is inaccurate, difficult to rank when the number of jobs is large, is influenced by the subjectivity of the evaluator, and can only be applied in small-scale organizations.

b ) Grouping/grading involves establishing a number of job categories or types (the job categories/types will be called salary grades). The first step in implementing this method is to determine the number of specific job categories or types. Then, each group/grade or salary grade is specifically defined. Finally, each job is compared with the definition of the category/group and the jobs are arranged into each category.

6. Master Nguyen Van Diem, Associate Professor, Dr. Nguyen Ngoc Quan (2004), "Human Resource Management Textbook", Labor and Social Publishing House - Hanoi, page 204

7. Master Nguyen Van Diem, Associate Professor, Dr. Nguyen Ngoc Quan (2004), "Human Resource Management Textbook", Labor and Social Publishing House - Hanoi, page 204

appropriate group/class. The advantage of this method is that the classification will help determine a set of standards for job classes. This is the basis for standardizing salaries for similar jobs and maintaining the difference between salaries of different jobs in the organization. The disadvantage of this method is that the construction of a set of standards will create rigidity; the stability of the classification system makes it difficult for the enterprise's salary system to adapt to changes. c) Scoring is the measurement of job values by points. This is the most popular method. When implementing this method, the evaluation council must determine and set out scoring criteria. Then, the council will compare the job description with the given criteria and then quantify the job values. When this method is put into practice, it encounters some difficulties in determining criteria (seeing which is more important or less important). Moreover, the scoring method also takes a lot of time to perform. The biggest advantage of this method is that the assessment will be relatively accurate, easy to do, easy to understand and easy to explain. d) Factor comparison is a method of quantifying the value of a job according to each factor. In this method, the evaluator does not need to think about the entire job when evaluating. Instead, they decide on individual factors of the job and then compare different jobs according to each factor. The evaluator first ranks the difficulty levels of the job. The job description is the basis for this ranking. Then, the evaluator allocates a score to each job factor and finally arranges the results into a table.

5.4. Building a payroll system in the enterprise:

To build a salary system, businesses can consider implementing the following order: Step 1 : Review the minimum wage set by the state. This step is to ensure the legality of the salary system.

Step 2 : Review prevailing salary levels in the market. This step helps ensure that the company's salary policy is competitive with the outside.

Step 3 : Job evaluation. This is done by using an evaluation panel and appropriate evaluation methods to assess the value of jobs, to arrange

jobs in a hierarchy of value from low to high or vice versa. This step is to ensure internal fairness.

Step 4 : Determine salary levels (salaries for job categories/types).

Step 5 : Determine the salary range for each grade

Step 6 : Divide salary scales into levels.

5.5. Forms of payment:

a) Time-based salary :

This is a method of paying wages based on the actual working time of employees, provided that they meet pre-established minimum performance standards, and the time is calculated by hour or month. Wages based on time will correspond to the level of each employee, evaluated through a scale of points.

This method of payment is often applied to production jobs that are difficult to set specific standards, or jobs that require high quality, jobs where productivity and quality depend mainly on machinery, equipment or temporary activities... The advantage of this form is that it is easy to understand, easy to manage, creating conditions for both workers and managers to calculate wages easily. The disadvantage is that this method of payment does not measure effort or production efficiency, so the encouragement to perform the job needs to be implemented by other motivational measures in addition to direct financial incentives.

b) Incentive pay :

This form includes four detailed payment methods as follows:

Pay for performance is a method of paying wages based on an employee's previous performance. The advantage is that wages are directly linked to work results and encourage employees to work. The disadvantage is that this method of paying wages depends mainly on the quality of the organization's performance appraisal system and creates internal competition.

Piece rate pay is a method of paying wages based on the number of units of product produced. This method of paying wages only applies to the production department, and the business must standardize the work (meaning the work must be measurable). Payment method

This salary has the effect of increasing labor productivity and encouraging workers to work effectively.

Pay by sales is a method of paying wages based on sales. This method of paying wages is only applicable in the sales department. This method also has the same advantages as paying by products.

Team Bonus is a method of paying salary based on working in groups, teams, and the salary depends on the performance of the whole group, team, or team. The advantage of this method is that it increases solidarity within the group and reduces internal competition. The disadvantage is that this method only applies to businesses that encourage teamwork.

Company-wide bonuses are a way of paying salaries plus bonuses that are shared among all members of the company. These include gain sharing and profit sharing. Gain sharing: is when members of the organization benefit from increased productivity, reduced costs, and improved quality through bonuses. Profit sharing: is when at the end of the year the company calculates a net profit and the company allocates a portion of this profit to reward employees.

c) Skill-based pay : is a method of paying based on job skill groups. The more complex the skill groups are, requiring in-depth knowledge and high training, or the skill groups with high market demand, the higher the salary will be.

III. OVERVIEW OF PERFORMANCE EVALUATION:

1. Concept of performance appraisal:

Performance appraisal is a formal system of periodically reviewing and evaluating an individual's performance. 8 In other words, performance appraisal can also be considered as the process of determining the level of performance of an individual or a group.

Performance appraisal is a very important job because it is the basis for rewarding, motivating, or disciplining as well as helping managers apply fair salary. Superficial, subjective performance appraisal will cause many problems in human resource management.

8 Nguyen Huu Than (2004), Human Resource Management, 6th edition - Thong Ke Publishing House - Hanoi, page 316.

2. Importance of performance appraisal:

Performance appraisal (PRA) plays an extremely important role in HRM. This activity helps improve the working efficiency of individuals, groups, and organizations by measuring the work results of employees, thereby diagnosing organizational problems, identifying the strengths and weaknesses of employees to arrange appropriate work. In addition, PRA also provides feedback to employees on the level of their work completion compared to the sample standards. From there, employees can self-adjust or the business can take measures to help employees adjust better (if employees have not performed well); reward (if employees do well). PRA also provides information to support most of the functional activities of HRM or support managers in making personnel decisions such as promotion, salary increase, transfer, and contract termination.

3. Building a performance evaluation system:

3.1. Influencing factors:

Labor laws . These are the terms of the law, the labor agreement between the employer and the employee that regulates the relationship between the business and the employee. Some companies have agreements with employees about having fair evaluations during their work process to have salary and bonus policies that are appropriate to what they have done.

The role of trade unions . Trade unions are an organization that has a strong influence on businesses, they can have an impact on changing company policies. For example, managers often want to evaluate performance based on the level of work completion, while trade unions tend to focus on seniority. Thus, in some businesses, trade unions may have opinions that make the evaluation based on the number of years of work of officers and employees instead of the level of work completion. This is often seen in state-owned enterprises.

Organizational culture . Performance appraisals are often most effective in organizations with strong cultures. In a company with a strong organizational culture, everyone follows the same corporate values, they will have similar behaviors, and as a result, appraisals will be easier.

3.2. Performance evaluation process:

Figure 1.5 : Summary of employee performance appraisal process.

Source : Nguyen Huu Than (2004), "Human Resource Management", 6th edition - Thong Ke Publishing House, Hanoi, page 321.

First, the evaluator will identify specific evaluation objectives to see which objectives are most important. Next, they will establish expectations for the job to build goals and standards for job completion. The job content check has been done by reviewing the job descriptions will be carried out next. The next step of the ETTCT process is to evaluate the completion of the work based on comparing the results of the work completion with the set standards. Finally, the evaluator will discuss the evaluation results with the employee to find out the reasons for the work completion, make a plan to overcome and set criteria for the next evaluation. Whether the evaluation process with each step mentioned above is carried out smoothly and effectively or not depends on the technique, qualifications, experience of the evaluator as well as the cooperation of the person being evaluated.

3.3. Basic elements of a performance appraisal system:

a) Evaluation criteria : Providing evaluation criteria to answer the question "what does the business evaluate?". Currently, businesses are often interested in work results, work behavior and work attitude. Work results are considered

more important than assessing job performance. Work behavior is often closely examined, especially for jobs that are difficult to quantify. Work behavior includes the ability to work and cooperate in teams, leadership style, and customer orientation.

b) Evaluator:In most organizations, the Human Resources department is responsible for designing and testing performance appraisal programs. However, line managers must also be involved in the process. Who actually evaluates employees depends on the specific business. Here are some common ways to specify who evaluates performance today.

The direct manager is the one who evaluates. This is the most common method. There are many reasons why companies favor this method. Firstly, because the direct manager knows clearly about the work performance of his subordinates. Secondly, the line manager is responsible for managing his unit, so he needs to directly evaluate his subordinates. The disadvantage of this method is that the direct superior can emphasize some aspects while ignoring others. In addition, these managers often link the performance appraisal with salary increases and bonuses while their evaluations sometimes lack objectivity. 9

Subordinates evaluate superiors . Some companies now let subordinates evaluate their superiors. They believe that subordinates are in a favorable position to clearly see the management ability of their direct superiors. As a result, superiors will also be aware of the needs of their subordinates and manage better. 10 The disadvantage of this method is that superiors tend to be lenient and easy-going with their subordinates; while subordinates are sometimes shy and do not dare to make direct comments about their superiors.

Peer review . Many companies let peers review each other. Peer review can be reliable if the work group is stable for a long time and the work requires interaction between employees. However, this method is not widely accepted.

Self-assessment is also a method applied in some businesses. If employees understand the goals and standards of their work completion, they

9 Nguyen Huu Than (2004), Human Resource Management, 6th edition - Thong Ke Publishing House - Hanoi, page 327.