Chapter 7

Manage employee evaluations

Your employees need support too. They need to know if they’re on the right track. Employee evaluations help with that.

An employer and employee at a desk doing an employee evaluation

What is an employee evaluation?

Employee evaluations, also known as employee performance reviews or employee performance appraisals, are a way to assess each employee’s performance. They help you get the best out of your employees by giving them feedback on what they did well and how they can perform better.

When to do employee evaluations

Employee evaluations are usually done once a year, either at the end of the year or at an employee’s work anniversary. But it’s good practice to do it more often, such as once every two months or quarterly. It’s better to give employees ongoing feedback on their performance rather than meeting with them only once or twice a year.

Employee evaluation in action

An employee evaluation is an ongoing process that takes reflection and careful judgement. It’s about listening and providing constructive feedback. It’s also about giving employees the opportunity to grow in their job rather than dwelling on past mistakes.

Here’s what you need to do when evaluating employees.

Be prepared

Schedule each employee evaluation in advance so you and your employee have enough time to prepare for it. Look at your employee’s job description and notes you’ve taken during your regular check-ins. Get feedback from their manager, teammates, or even customers they’ve interacted with.

Ask your employee to complete the same employee review form beforehand to assess their own performance.

Use this sample employee review form to help you organise your thoughts:

Encourage a two-way conversation

Ask for the employee’s ideas and input into successes, improvements, challenges and job satisfaction. Recognise their efforts and focus on how they can do better. Give them feedback they can act on and steer them to the right information. Try to remove any bias and focus on the complete picture of their performance.

Outline future goals

Set achievable goals for your employee and give them a say on what their goals need to be. Go back and update their goals during each employee evaluation; and in your regular catch-ups, check to make sure they’re on track.

This is also the time to have an honest and open discussion about pay and promotion. Talk to your employees about any pay increases or bonuses and how they can move to another role or position.

Document the discussion

Take notes during your discussion and write down everything you’ve agreed on. Share these notes and other documents with your employee to remind them about their goals and remind you about what you need to do to help them. You’ll also use them as a starting point for the next employee evaluation.

Regular feedback and recognition

In addition to evaluations, catch up with your employees weekly, every two weeks, or monthly. Talk about what they’re currently working on and address any issues or challenges they’re facing. Don’t wait until the employee evaluation to raise any issues.

Thank your employee for anything they’ve done that goes above and beyond what you would expect. Reward them for their success, even if it’s something small such as a thank you note, buying them a cup of tea, or mentioning them in your next team meeting. A little positive reinforcement goes a long way.


Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.

How to hire employees

Hiring help can improve your business, and your lifestyle. But it’s a big process. Here are the main things to keep in mind.

  1. Know your employer responsibilities

    You have a duty of care to your employees. Get familiar with your employer responsibilities before you start the hiring.

  2. Register as an employer

    You’ve considered the position you want to fill and your own responsibilities. It’s time to register as an employer.

  3. Write a job description

    You want the perfect employee. They want the perfect employer. Find out how to write a job description that stands out.

  4. The recruitment process

    Now the applicants are lining up. So how do you sort through them all and select the best fit for your business?

  5. Employee onboarding

    Employee onboarding is more than orientation. It’s setting expectations, building relationships, and providing support.

  6. Run payroll for your employees

    Paying your employees right is essential. It’s also a legal requirement. Let’s take a look at the payroll process.

  7. Manage employee evaluations

    Your employees need support too. They need to know if they’re on the right track. Employee evaluations help with that.

  8. Tools and guides for your business

    Now that you’re an employer, you want to strengthen your business. Xero’s got resources and solutions to help.

Download the guide to hiring employees

Learn how to hire employees and how to handle the admin that goes with it. Fill out the form to receive this guide as a PDF.

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