A performance review is a formal assessment process where an employer evaluates an employee’s work performance, achievements, and areas for development over a specific period. 

What is performance review in Australian context

In Australia, performance reviews typically occur annually or bi-annually and serve as structured opportunities to provide feedback, set goals, identify training needs, inform remuneration decisions, and document performance for legal compliance under Fair Work regulations.

The primary purposes include:

• Providing structured feedback on work performance
• Recognising achievements and contributions
• Identifying areas for improvement and development
• Setting clear objectives for future performance
• Informing decisions on remuneration, promotion, and career development
• Creating documentation of performance history
• Aligning individual performance with organisational goals
• Ensuring compliance with legal and regulatory requirements

Legal framework in Australia

Fair Work Act considerations

While the Fair Work Act 2009 does not explicitly mandate performance reviews, they play an important role in:

• Demonstrating procedural fairness in performance management
• Supporting decisions related to promotions, pay increases, or terminations
• Providing evidence in unfair dismissal cases
• Demonstrating compliance with anti-discrimination legislation

Best practice guidelines

The Fair Work Ombudsman recommends that performance reviews:

• Be conducted regularly and consistently
• Use objective and measurable criteria
• Allow for two-way communication
• Be documented appropriately
• Include clear action plans for improvement where needed

Common performance review methods

Rating scales

A numerical or descriptive scale (e.g., 1-5 or “Below Expectations” to “Exceptional”) used to rate various performance dimensions.

Management by Objectives (MBO)

Evaluating performance based on achievement of specific, measurable objectives agreed upon at the beginning of the review period.

360-degree feedback

Collecting feedback from multiple sources including managers, peers, subordinates, and sometimes clients or customers.

Behavioural Anchored Rating Scales (BARS)

Combining rating scales with specific behavioural examples that illustrate different performance levels.

Self-assessment

Employees evaluate their own performance against set criteria before the manager’s assessment.

Typical review cycle

Preparation

• Scheduling the review meeting
• Gathering performance data and examples
• Reviewing previous goals and objectives
• Employee self-assessment completion
• Review of position description and KPIs

The review meeting

• Discussion of achievements and challenges
• Sharing of feedback from various sources
• Review of goals and objectives
• Identification of development needs
• Setting new objectives and development plans

Documentation

• Completion of formal review documentation
• Signatures from both parties
• Filing in the employee’s personnel record
• Copy provided to the employee

Follow-up

• Regular check-ins on progress against new objectives
• Implementation of development plans
• Adjustment of goals if circumstances change

Key components of effective performance reviews

Objective performance measures

• Key Performance Indicators (KPIs)
• Sales targets or production quotas
• Project deadlines and milestones
• Quality metrics and customer satisfaction scores
• Compliance with policies and procedures

Behavioural competencies

• Communication skills
• Teamwork and collaboration
• Leadership and management skills
• Problem-solving and decision-making
• Adaptability and resilience
• Innovation and creativity

Values alignment

Assessment of how well an employee demonstrates the organisation’s core values in their work and interactions.

Development planning

• Identification of skills gaps
• Career aspirations discussion
• Training and development needs
• Mentoring or coaching requirements
• Succession planning considerations

Performance review and remuneration

Pay for performance

Many Australian organisations link performance review outcomes to:

• Annual salary increases
• Performance bonuses
• Incentive schemes
• Promotion decisions

Market considerations

Performance reviews often incorporate:

• Market salary benchmarking
• Industry performance standards
• Consideration of economic conditions

Legal and ethical considerations

Procedural fairness

• Consistent application across all employees
• Clear communication of expectations
• Opportunity for employee response
• Transparency in the process and outcomes

Anti-discrimination compliance

Reviews must avoid bias based on protected attributes such as:

• Age, gender, or cultural background
• Disability or medical condition
• Family responsibilities
• Union membership or industrial activity

Privacy and confidentiality

Performance review information should be:

• Securely stored
• Accessible only to authorised personnel
• Used only for legitimate business purposes

Performance review challenges

Bias and subjectivity

Common biases in performance reviews include:

• Recency bias (overemphasis on recent performance)
• Halo/horn effect (allowing one aspect to influence all ratings)
• Leniency or severity bias (consistently rating too high or too low)
• Similar-to-me bias (favouring those similar to the reviewer)

Ineffective implementation

Issues that can undermine the effectiveness of performance reviews:

• Lack of specific, actionable feedback
• Insufficient training for managers
• Inconsistent application across the organisation
• Failure to follow up on development plans
• Treating reviews as an annual administrative task

Modern trends in performance management

Continuous feedback

Moving away from annual reviews toward regular check-ins and real-time feedback.

Performance enablement

Shifting focus from retrospective evaluation to forward-looking development and support.

Technology integration

Using digital platforms for:

• Goal setting and tracking
• Continuous feedback
• Development planning
• Performance analytics

Strengths-based approaches

Focusing on leveraging employee strengths rather than merely addressing weaknesses.

Industry-specific considerations

Public sector

• Highly structured performance management frameworks
• Clear linkage to classification structures
• Emphasis on policy compliance and public service values

Private sector

• Often linked more directly to business outcomes and profitability
• Greater variability in approaches between organisations
• More likely to use financial incentives and bonuses

Non-profit sector

• Focus on mission-aligned outcomes
• Balance of financial and non-financial performance measures
• Emphasis on stakeholder impact

Best practices for Australian organisations

Cultural considerations

• Awareness of cultural differences in giving and receiving feedback
• Sensitivity to communication styles and preferences
• Recognition of diverse perspectives and contributions

Training and support

• Manager training in conducting effective reviews
• Employee guidance on participation in the process
• Clear guidelines and resources for all participants

Integration with other HR processes

• Alignment with recruitment and selection
• Connection to learning and development
• Linkage to succession planning
• Coordination with remuneration reviews