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Three points to consider when developing performance contracts

by , 21 May 2013
As employer, it's crucial you make your employees sign a performance contract. Having them sign a performance contract ensures they agree to specific job outputs and targets. Read on to discover what you should consider when developing these contracts to ensure employees agree to what you set them to achieve.

Performance contracts ensure all your employees know what's expected of them.

In addition to this 'if you ever end up at a dismissal for poor performance you'll have evidence of the agreed performance targets,' says the Practical Guide to Human Resources Management.

But to develop an effective performance contract that doesn't contravene any of your policies and procedures, there are certain things you should consider.

Key points to remember when developing your employees' performance contract

  1. The performance contract must be applied to each company position that has measurable outcomes and objectives.
  2. The performance contract must form the basis of the performance appraisal document and will be reviewed as per your organisation's performance management system.
  3. Weighting: 'This refers to the importance and priority of a specific output in relation to the purpose or role of the job,' says the Guide. The weighting of the position should total 100%. For example, Output 1 could be weighted at 30% out of 100%, Output 2 at 20%. The ratings can be done exactly the same as the ratings defined in the performance management system.
  4. You must refer to the following documents to determine the content of the performance contract:
  • The job description of the employee.
  • The business plan for the company.
  • Applicable project plans.
  • Performance standards for employees in your company.
  • The company's generic competencies.

Remember, there's no specific format for performance contracts, you have to tailor make solutions to fit in with your company and employees.

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