What are the pros and cons of employee appraisals?

Employee appraisals give employers the perfect opportunity to celebrate individual achievements and help people feel confident about how they’re progressing at work. But, appraisals don't always have the best reputation. Whether it's the volume of admin involved or the nerves and stress your employees and managers feel, it's fair to wonder whether employee appraisals are worth the effort, especially when your small business’s to-do list is overflowing.

This guide explores the pros and cons of employee appraisals in more detail and shows you how to create a positive evaluation process for everyone.

Skip to: 

• What is an employee appraisal?

• What are the pros of employee appraisals?

• What are the cons of employee appraisals?

• How can you make employee appraisals more effective?

• Make performance conversations easier with Breathe

• FAQs about employee appraisals

What is an employee appraisal?

An employee appraisal (sometimes called a performance review) is a meeting between a manager and an employee to talk about how things are going at work. It's a space for the manager to recognise what the employee has achieved and check if they need any support in achieving their agreed goals.

An appraisal should give employees plenty of opportunities to share their thoughts, too. If they're struggling with their workload or would like to take on more responsibility, for example, an appraisal gives them dedicated time to express these points to their manager.

Traditionally, many small businesses have held formal appraisals once a year, often known as an annual performance review. But real performance management shouldn't be so infrequent. More regular catch-ups let managers offer feedback and support throughout the rest of the year. They also help employees understand how they're doing, so there won’t be any surprises when the next formal appraisal comes around.

What are the different types of employee appraisals?

There are several ways to approach appraisals, depending on how your business prefers to review performance and gather feedback. Here are five common types.

What are the pros of employee appraisals?

Employee appraisals are a great way to help your team feel supported and valued at work. Here are six benefits of weaving appraisals into your people management approach.

1. Appraisals set clear performance expectations

Do your employees know exactly what's expected of them in their roles? The answer might not be straightforward, especially if your business has been restructured recently or is starting to use AI to take on parts of their work. According to the Institute of Internal Communication's IC Index 2026, just 16% of UK employees agree that it's clear what they're supposed to do when changes like these happen.

Employee appraisals allow managers to clear up any confusion. They can discuss what each individual employee is responsible for and agree on more collaborative goals that support the wider business. The aim is for employees to have a better understanding of what they're working towards and how their contribution makes a difference.

2. Appraisals improve communication between managers and employees

Good communication between managers and employees can make a big difference to how people feel about their jobs. But unfortunately, CIPD's Good Work Index 2025 found that around 10 million UK employees don't receive useful feedback from their manager.

Regular performance appraisals give both sides dedicated time to talk openly about how things are going. These two-way conversations can build trust and make employees feel more comfortable speaking up when they need support.

3. Appraisals recognise achievements and motivate employees

Everyone deserves to know when they're doing a great job, and not receiving this acknowledgement can damage an employee’s performance. In particular, research reported by People Management finds that 53% of UK employees feel less motivated when they don’t receive enough recognition for their work. The same study found that private thanks from a manager was preferred by 65% of employees.

Employee appraisals give managers a chance to acknowledge their team's hard work and celebrate what they've achieved. A little appreciation can go a long way towards improving employee engagement and helping your people feel valued and motivated to keep doing their best.

4. Appraisals identify training and development needs

According to the Department for Education's Employer Skills Survey, 12% of UK employers reported having at least one employee who wasn't fully proficient in their role.

The performance appraisal process gives managers a chance to identify where team members might need extra training or support. Employees can also talk about any skills they'd like to develop or opportunities they'd like to explore as they progress in their careers.

Performance evaluations help managers plan relevant training and give employees something to work towards, whether they're looking to improve in their current role or prepare for their next step.

5. Appraisals support fairer career progression decisions

Formal appraisals provide a record of each person's achievements and progress towards their goals, allowing managers to use data and facts when they’re making important decisions about their employee’s next steps.

Using consistent appraisal criteria across your team can also help employees feel they're being treated fairly. Everyone has an opportunity to demonstrate what they've achieved and discuss where they'd like their career to go next.

6. Appraisals address performance concerns before they grow

If an employee is struggling to meet their targets or making mistakes they wouldn't normally make, regular appraisals help managers understand what's going wrong and offer support before problems become serious enough to consider dismissal.

If things don't improve, having a clear record of the concerns discussed and the support offered can help employers demonstrate that they've followed a fair process.

This is particularly important with changes to unfair dismissal rights on the way. From 1 January 2027, the Employment Rights Act 2025 will give employees protection against ordinary unfair dismissal after just six months of service, down from the current two years.

For more information on how to prepare and react to these employment law changes, we’ve put together this mini webinar and checklist to work through at your own pace.

What are the cons of employee appraisals?

Employee appraisals have plenty of benefits, but they don't always go to plan. Poorly managed reviews can leave employees feeling frustrated or unfairly judged, while managers may struggle to find the time to make them worthwhile. Here are six potential drawbacks to keep in mind.

1. Appraisals can make employees feel anxious

Sitting down for a formal performance review can be nerve-racking, especially if employees aren't sure what their manager is going to say. Research by PPL PRS found that performance reviews were a top source of workplace anxiety for 50% of employees.

The pressure can feel even greater when appraisal outcomes influence pay rises or bonuses. Employees may worry about receiving criticism or being judged unfairly, making it harder for them to speak openly about how things are going at work.

2. Manager bias can affect appraisal outcomes

Cognitive bias causes us to make assumptions about other people without realising it. So, a manager’s experiences or beliefs may influence how they judge their direct report’s abilities or behaviour and affect appraisal outcomes, even when they're trying to assess everyone fairly.

There are 188 different cognitive biases that can influence how we think and make decisions. Here are four examples that could affect employee appraisals.

Without clear, consistent appraisal criteria, employees doing similar jobs could receive very different assessments. This can leave people feeling unfairly judged and damage their trust in the appraisal process.

3. Annual appraisals can overlook months of progress

A lot can happen over 12 months, but managers may find it easier to remember an employee's most recent achievements or mistakes that don’t give a complete picture of someone’s performance. This is known as the recency effect, where recent events have a greater influence on our judgement than things that happened further in the past.

For example, an employee might have performed brilliantly for most of the year but struggled with a project just before their appraisal. Their manager could end up focusing on this setback rather than recognising everything else they've achieved.

4. Appraisals can take up valuable time

An hour-long appraisal might not sound like much, but the meeting itself is only part of the work involved. Managers also need to review performance records, prepare feedback and complete follow-up paperwork.

For a small business with 20 employees, even two hours per appraisal adds up to 40 hours of work. That's an entire working week spent on annual reviews.

The process can take even longer when managers rely on spreadsheets or other documents to keep track of performance. Without an organised system, they can spend a lot of valuable time hunting for information rather than having meaningful conversations with employees.

5. Performance ratings can demotivate employees

Employee appraisals don't always leave people feeling positive about their performance. A Robert Walter survey of 2,000 UK professionals found that 35% felt less optimistic about their role following their most recent appraisal.

One possible reason is the way some businesses use performance ratings. Imagine an employee who's worked hard all year, only to receive an 'average' score. They might feel their efforts haven't been recognised, especially if their manager hasn't explained the reasoning behind the rating. Employees can end up focusing more on their score than the constructive feedback that could help them improve.

6. Appraisals can achieve very little without follow-up

An appraisal might end with an employee and their manager agreeing on new goals or training opportunities. But if nobody follows up on those plans, it's unlikely much will change, which is proven by a recent NHS Staff Survey. While 86% of NHS employees received an appraisal, only 26% felt it had helped them improve how they did their job.

For small businesses, it's a reminder that the real value of appraisals comes from what happens afterwards. Employees need managers to track progress and deliver on the support they've promised.

7. Businesses don’t widely embrace employee appraisals

Traditional annual appraisals can be difficult to get off the ground, particularly in small businesses where managers are already short on time. Many managers haven’t received formal training in performance management, and some question whether structured annual reviews help employees to improve at all.

In a guest blog for Breathe, former BBC HR Director Lucy Adams explains that managers’ reluctance to carry out performance reviews was one of the biggest challenges identified in a poll of small to medium-sized businesses.

She recommends moving away from rigid annual processes in favour of sharing timely feedback in regular one-to-ones. This gives employees the chance to act on the feedback while it’s still relevant, rather than waiting until their next formal appraisal.

How can you make employee appraisals more effective?

A few changes to how you manage appraisals can make them more useful for your employees and less time-consuming for managers. Here are five ways to get more from your employee appraisals.

• Set clear, achievable performance goals. Agree on SMART goals that are specific, measurable, achievable, realistic, and time-based, with each employee so they know what they're working towards, and then review these when business priorities change. Breathe Performance's Goals & Tasks feature helps you keep track of individual goals alongside wider company priorities.

• Give feedback throughout the year. Don't save praise or constructive feedback for annual reviews. Acas recommends giving employees regular feedback to help your employees understand how they're doing. To support a more frequent approach, Breathe Performance lets you share kudos and gather 360-degree feedback from a range of colleagues, rather than just delivering one-way feedback from a manager to their direct report.

• Make appraisals a two-way conversation. Give employees plenty of time to share their views and raise any concerns. Breathe Performance's one-to-ones feature helps managers prepare agendas and record action items for future catch-ups with their individual team members.

• Focus on employee development. Use appraisal conversations to identify training needs and discuss career ambitions. Agree on practical development goals and explore learning opportunities through Breathe Learn.

• Ask employees how they're feeling. Performance can be affected by how people feel about their work. Breathe Performance's Polls & Surveys feature lets you gather employee feedback, including through eNPS surveys, to better understand how your team is feeling.

Want to help your managers feel more confident about handling appraisals? Check out our free Performance Management for Line Managers course in the Breathe Growth Academy.