The equity difficulty lies in gauging the value of employee contributions so that recognition and rewards are commensurate with those contributions. No performance appraisal system is needed. It seems obvious that an annual performance appraisal system won't do. Something else is required. The political issue lies in ensuring that rewards and recognition are consistent with employees' views as well as management's views.
Employees often have a different picture of who is contributing what to the organization.
From their perspective, the real contributors often go unrewarded. One obvious solution here is to make available a certain amount of funding for employee-awarded rewards and recognition. In any event, performance appraisal systems simply don't play a significant role in rewards and recognition. Automatic annual pay raises inflate the wage and salary structure. As mentioned earlier, pay scales should be aligned with the labor market, not driven up automatically each year as the result of merit increases.