Performance appraisal has been described as the process whereby the relative worth of an employee in a particular company is evaluated. It involves measurement of an employee’s work behaviors, comparing them to already established standards and communicating the results back to the employee. Performance appraisals were instituted as a means of income justification i.e. they were used to decide if an employee deserved to be paid a given wage amount (Lawrie, 1990). This application of performance appraisals has continued until now but many arguments have been raised on its usage particularly as a means to justify pay increases or cuts. Personally, I believe performance appraisals to be an integral part of an organization operation and that its advantages outweigh any disadvantages perceived. In the past, performance appraisals were only used as a remuneration tool whereby it was assumed that a rise or a cut in pay was the only motivation employees needed to improve their work. This view however changed after numerous researches proved that the traditional system often failed since salary levels was not the only element that determined employee performance (Locher & Teel, 1977). The modern performance appraisal system is aimed at identifying an employee’s strengths and weaknesses as well as determining ways of improvement and subsequent skills development. The performance appraisals are also used to determine reward outcomes whereby bonuses, promotions and pay increases are allocated to employees who are judged to have performed above a given level. The main purpose of a given company is to generate profits and thus employee management is a very important aspect. One of the most important features involved in employee management is the performance appraisal system. When correctly used, it serves as a tool for identifying and fixing problems facing the employees. Non-productive members in the organization can also be identified and appropriate measures taken either through training or dismissal. Performance appraisals should inherently be associated with reward outcomes. It is essential for organizations to distribute rewards in an open and fair manner whereby those most deserving in regards to merit and results are identified and justly rewarded. The performance appraisal system is the only process available that can be applied to achieve a rewarding system that is fair and consistent. Apart from this performance appraisal also offer other advantages when used as a pay-increase system. Employees generally expect to be rewarded when they perform better and tend to distrust the management if they feel someone who is less deserving has received a reward (Lawrie, 1990). This can be easily solved using a performance-based pay increase system. Secondly, this system allows for financial planning. Time and time again, companies face financial difficulties and thus it is very hard to distribute what little is available among the workers. With a performance appraisal system geared on pay increase, the company can isolate those individuals who really deserve an increase from the rest. However, many critics have pointed out that this system is flawed without any way to perfect it (Derven, 1990). Many have pointed out that this system damages trust between managers and