Performance appraisal is not a reason or excuse for arbitrarily cutting employees' pay, reassigning them, or even imposing "last-place elimination." Employers should improve the scientific rigor and fairness of performance appraisal so that the overall development of the organization and the individual development of employees are on the same track.

"The 2023 year-end bonus is basically gone, and the company didn't explain the appraisal criteria—it just notified us of the results orally." Not long ago, Lu Qing, a 30-year-old working mother, felt somewhat powerless after learning that her 2023 performance rating was a C.

Her company grades employee performance into five levels: A, B+, B, C, and D. A C rating not only disqualifies an employee from promotion or a raise, but also limits the year-end bonus to less than one month's pay, whereas a B rating brings a bonus of four months' pay.

In fact, Lu Qing's 2022 year-end appraisal was also rated C. "That year I was pregnant, but I worked until the end of the year without affecting my normal work, and I produced many innovative results." Because she received a C rating two years in a row, Lu Qing ultimately received notice of being laid off.

Reporters from Workers' Daily interviewed multiple employees and found that Lu Qing's experience is not an isolated case. Many employers routinely link performance appraisal results to employees' income and job qualifications, and some employees are subjected to pay cuts, reassignment, or even "last-place elimination" for failing to meet appraisal targets. Some employees wonder: "Is appraisal just simple punishment? Are these practices scientific?"

"What are the criteria for appraisal scoring?"

Lu Qing, who holds a doctorate, works in research and development. In July 2023, after finishing her maternity leave, Lu Qing returned to work. "I completed all my projects, my workload was no less than anyone else's, and I didn't even take nursing leave, yet my performance was rated C. I think that's very unreasonable."

"I don't know the appraisal process or criteria. My supervisor said that in 2022 I was pregnant, so I wasn't given a workload greater than a C rating, and that in 2023 my return-to-work period was short and I couldn't get back up to speed quickly..." Being rated C in performance appraisals two years in a row left Lu Qing helpless, but the bad news didn't end there. Ten days after learning of the appraisal result, Lu Qing suddenly received notice that she was being laid off. "The reason given was that the company was operating at a loss, and I was the only person in our department to receive such notice." Lu Qing is now negotiating her departure procedures with the company.

Unlike Lu Qing, Song Lei's performance appraisal result was subject to a company-wide "one-size-fits-all pay" approach. Song Lei is an equipment procurement engineer whose income consists mainly of base salary and performance bonus in a 6:4 ratio. "How much performance bonus is paid depends on the base amount and the payout ratio. The base amount is set according to job grade; the payout ratio is determined by the parent company's rating and scoring, and can reach as high as 110%, while the lowest means no bonus at all." Song Lei told the reporter, "For example, in 2022 the parent company gave us a score of 98 and rated us 'needs improvement,' so our performance bonus was paid at 98% of the base amount."

What dissatisfied Song Lei was that "my colleagues and I have no idea what the parent company's scoring criteria are. We had already completed our assigned work, but the parent company just said 'the degree of completion is not high,' and we don't know what else needs to be improved." Song Lei said helplessly that under this appraisal method, some employees choose to "slack off" and push work onto newcomers, so many colleagues who work diligently see their workload surge while their pay stays the same.

Last place means elimination—that's illegal!

In October 2023, the Xiangyang Intermediate People's Court in Hubei Province released a batch of typical labor dispute cases. Among them, a case concerning an employee eliminated for ranking last drew attention.

In the case, Lin joined a company to work in insurance management. In October 2021, in order to motivate employees, the company formulated a last-place elimination plan, stipulating that those ranked last in appraisal would have their pay cut by 30% and be transferred to waiting-post training or have their labor contracts terminated. That year, the company announced the appraisal results, and Lin ranked last. In January 2022, the company held a talk with Lin and, on the grounds that he ranked last in the appraisal, lacked ability, and was incompetent for his position, terminated the labor contract between the two parties.

Lin believed that he had never seen the last-place elimination plan, and that the company's dismissal based on that plan constituted an illegal termination of the labor contract.

The court held that the law allows employers to formulate their own rules and regulations or major matters involving the vital interests of employees, but such rules must be discussed through democratic procedures and determined through equal consultation with the trade union or employee representatives, and must be made public to employees. Because the company failed to prove that the last-place elimination system was formulated through democratic procedures and had been made public to Lin, the system could not serve as the basis for terminating the labor relationship with Lin, and the company should pay Lin compensation for illegally terminating the labor contract.

"So-called last-place elimination ultimately amounts to dismissing an employee on the grounds that he or she is 'incompetent for the work.'" Zhang Xuewei, a judge of the First Civil Division of the Daxing District People's Court in Beijing, explained that under Article 40 of the Labor Contract Law, in such circumstances the employer should provide training or reassign the employee; terminating the labor relationship without such adjustment or training constitutes an illegal termination, and the employer must pay compensation for illegally terminating the labor relationship.

Zhang Xuewei said that some employers do not attach importance to the formulation and implementation of performance systems, and it often happens that a company's performance rules have been applied for many years, yet upon court review it is found that the rules were never negotiated with employees when formulated or amended, and there is no record of their being delivered to or communicated to employees.

"Establish a procedure for objecting to performance appraisal"

"Performance appraisal itself is not illegal." Fu Yanpei, a lawyer at Jiangsu Jinhui Ren Law Firm, said that performance appraisal is a means of testing whether an employee's abilities meet the requirements of the position and is a manifestation of the employer's exercise of operational autonomy. When the system is lawful and has gone through democratic procedures, the appraisal results can be applied to subsequent job adjustments for employees; where there is indeed evidence proving that an employee is incompetent for the work, the employer has the right to reassign the employee within a reasonable scope.

Fu Yanpei told the reporter that the performance appraisal standards and methods formulated by an employer should be discussed by the employee representative congress or all employees, with proposals and opinions put forward, and determined through equal consultation with the trade union or employee representatives. After determination, the employer should make public or inform employees of the rules and regulations and decisions on major matters that directly involve their vital interests before they can be deemed effective.

"Employers may establish a procedure for objecting to performance appraisal." Zhang Xuewei believes that employers should calculate strictly in accordance with the performance appraisal calculation method they have published, must not "reprocess" relevant data without informing employees, and must not use "final data subject to the company's calculation" to exclude employees' right to supervise and raise objections.

In addition to establishing and improving performance appraisal systems, Fu Yanpei believes that employers should also return to the origin of performance appraisal in their thinking. "Improve the capabilities of human resources management personnel, ensure the transparency and fairness of the appraisal process, and do not use appraisal to arbitrarily reassign, cut the pay of, or even dismiss employees."

"Appraisal indicators can be formulated from both qualitative and quantitative aspects to reflect employees' work status as objectively and truthfully as possible." Zhang Xuewei believes that a scientific performance appraisal system can comprehensively describe employees' workload, work efficiency, and work results, so that the overall development of the employer and the individual development of employees are on the same track, promoting mutual benefit and win-win outcomes for both sides of the employment relationship.