Almost every company or business of appreciable size features one or more employee evaluation or employee performance evaluation program. There are many reasons why employers tend to have formal employee evaluations. Evaluations are a valuable assessment tool. For example, they are frequently used to rank employees by performance in order to properly allocate rewards or bonuses to the highest performing employees. Evaluations make eminent business sense; there aren't, however, any legal requirements for employers to administer employee evaluation programs.

Employee Performance Evaluations

According to the U.S. Department of Labor, the Fair Labor Standards Act doesn't actually require performance evaluations. Federal, state and municipal governments, however, are generally required by one law or another to administer effective civil service employee evaluations. North Dakota, for example, requires state government units to utilize the state's approved employee evaluation system for their employees. Private sector employers, though, are under no obligation to administer an employee evaluation program, though there are sound business reasons for doing so.

Employee Evaluation Programs

Administering an effective employee evaluation program can take some effort and managers and human resources departments spend a great deal of time on them. Typically, a supervisor will prepare a written evaluation for an employee, review it with him or her, and then present the evaluation to human resources. Though they can be uncomfortable for both employers and employees, evaluations are important tools for providing valuable feedback. An employee's evaluations are also usually kept in a personnel file for record keeping purposes. Typically, they are referenced to track performance from evaluation period to evaluation period.

Reasons for Employee Evaluations

There are many reasons why a business should utilize an employee evaluation program. In addition to allowing a way to reward high-performance employees and help identify possible issues, evaluations may also protect an employer legally. By using an evaluation system, employers can legally document meetings with an employee and discuss areas of progress, as well as areas where improvement is needed. An evaluation also offers a detailed paper trail that provides protection should the time come to terminate an employee because of poor performance.

Benefits of Employee Evaluations states that an employee evaluation system can help reduce employee turnover. Among the reasons employees give for leaving an employer -- better pay, an opportunity to learn new skills -- they site a lack of recognition from employers, or a lack of respect. Employers can use evaluations of their employees to identify their desire for learning new skills, which is a form of positive recognition. Moreover, evaluations help employers recognize which employees to reward in more tangible ways such as raises and promotions.

Employee Evaluation Programs

There are many different employee evaluation forms and formats used in the business world. Some companies evaluate employees based on rating scales, while others use written narratives. Regardless of any specific evaluation format, most businesses require supervisors to evaluate employees in a variety of areas. Depending on the type of work they are performing, evaluations typically involve work quality and performance, output, behavior, attitude, customer service performance, and how well the employee works with others.