In the world of professional growth and development, the role of performance appraisals has become very important. Appraisal letters are valuable tools that acknowledge employee contributions and motivate them to do better. According to a recent Betterworks survey, 66% of companies are using a continuous performance management model and were able to implement year-round productivity enhancements. This article will provide you with insights on how to write an appraisal letter and how to effectively summarize a performance review. 

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What is a Performance Appraisal Letter?

An appraisal letter is a written document that represents the organization’s acknowledgment of an employee’s contributions or hard work. The letter provides critical details, such as the revised salary breakdown, salary hike and any bonuses if applicable. Appraisal letters are usually given to employees during the performance appraisal process, which is conducted once or twice a year. The letter serves as an expression of the employer’s appreciation for the efforts, which acts as a source of motivation for the employees. 

What is the Purpose of an Appraisal Letter?

The goal of an appraisal letter is to evaluate an employee’s performance during a specific time period. This evaluation gives employers a framework for assessing skills, setting objectives, identifying growth opportunities, and discovering areas for improvement. It also serves as a tool for acknowledging and appreciating employee’s accomplishments, by providing them with well-deserved salary hikes, bonuses, or promotions. 

How to Write an Appraisal Letter?

The framework of an appraisal letter plays an instrumental role in employer-employee communication. To write a well-structured appraisal letter, there are four major components to be taken care of: 

Opening Statement

This establishes the tone for the entire performance review. Open with a professional and polite tone. Keep it short and concise.  

Performance Evaluation

One of the major parts of the appraisal letter is performance evaluation. You can highlight employee accomplishments and offer positive reinforcement. 

Revised Salary Structure

Ensure to include details such as the salary hike, updated salary breakdown, bonuses, or any promotions within the letter.  

Goal Setting for the Future

The appraisal letter serves as a roadmap for the future. Set reasonable, tangible objectives for the future to inspire employees for professional development that align with organizational objectives. Identify training and development opportunities and encourage employees to pursue them. 

Sample Appraisal Letter Template

Company Logo 

Company Address 

Company Name 


Subject: Performance Appraisal Letter 

Employee ID 

Dear XYZ, 

I hope this email finds you well. At (company), we deeply value exceptional employees and take great joy in acknowledging and rewarding hard work and contributions. Following your recent performance review, we extend our heartfelt gratitude and offer sincere recognition for your remarkable contributions. 

As a token of appreciation,  we would like to revise your cost to company XXXXXXX which will be effective from the (date). 

We believe that this increment reflects the value we place on your exceptional contributions, and we hope it serves as motivation for you to continue your dedicated efforts at (company). We sincerely believe this revised compensation aligns with the contributions you have made thus far. 

You will also receive a separate email with the complete details of your revised pay structure and benefits. We look forward to your long-term association with the company. 

This information is strictly confidential and any breach in confidentiality will result in strict disciplinary action. 

Best regards, 



Utilizing Technology in Appraisal Processes

With technological advancements, there are several HRMS software that can help expedite the appraisal processes, such as salary revision and ensuring data security through seamless technological integration. 

Automated Variable Pay Calculations

Variable pay if applicable can be automated through HRM systems such as PayWheel. You can establish the percentage or numerical value and the system can automatically handle the complex calculations for the employee with improved accuracy. 

Establish Bonuses, Incentives, and Revised Salary with Ease

You can set up bonuses, allowances, or incentives for individual employees and seamlessly implement the revised CTC using an HRM software like PayWheel. It immediately registers the revised salary structure and automates the salary calculations accordingly. 

Downloadable Pay Structure

Employees can download their updated pay structure, reflecting salary hikes and changes directly from the employee self service portal. Additionally, HRM software like PayWheel can also record all salary changes of an employee throughout the employee lifecycle. 

Data Security in Digital Appraisal

Digital data is prone to risks, which emphasizes the importance of data security. Performance ratings and reviews involve confidential processes that involve sensitive employee information. To safeguard this data, it is important to prioritize features such as encryption and access control. Using robust HRM software like PayWheel can help you keep your digital data safe. 


In short, performance appraisal letters are not just tools for evaluation but catalysts for personal and professional development. It recognizes commitment, acknowledges accomplishments, and lays the groundwork for future development. HRM tools like PayWheel ensure effortless and accurate salary revisions, bonuses, and allowances simplifying the appraisal management process for all HR professionals. PayWheel makes it easier to manage the performance evaluation cycle, from goal setting to monitoring progress, seamless salary calculations, and data protection.