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Performance Review For Employees: The Ultimate Guide

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Gone are the days when traditional employee performance review processes used to fetch results. Needless to say, most company executives, managers, and employees alike have come to abhor the obsolete techniques of reviewing employee performance lately. As per Deloitte’s shocking revelation, 58% of executives are of the view that their present process of performance review doesn’t result in enhanced employee performance or engagement. So, what does things point to? Of course, towards the need of embracing a set of innovative ways of evaluating performance review of employees.

What is intriguing to find is that 66% of employees with impressive performance scores aren’t really good performers. Is it because of using  a faulty process of performance review? Well, yes!

The roadmap lying ahead is to plan actionable strategies and come up with effective steps to witness the conclusion of a successful session of performance evaluations for employees.

If you are planning to conduct the employee performance review process in your company for the first time or pondering over transitioning from a traditional to a smart way of evaluating work performance of your employees, this blog has everything that you seek to know. Before we unlock the steps to drive performance review success, let’s get started with the basics.

Table of Contents

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What is a Performance Review for Employees?

Performance review for employees refers to a systematic and structured procedure in which an employer or manager evaluates and assesses an employee’s job performance, typically on an annual or periodic basis. This process involves setting clear expectations, reviewing an employee’s accomplishments, strengths, weaknesses, and providing feedback and guidance for improvement. It can also include goal setting for the upcoming period and may impact decisions related to promotions, salary increases, and development plans.

Having a proper performance review methodology in place ensures that subsequent performance appraisal process will also be completed efficiently. Adopting killer strategies and implementing these with the aid of a Performance Management System (PMS) can work wonders. This is because, chalking out smart techniques will bear fruit if there is a smarter Performance Management Software to materialize these for real.

If you want to boost workforce management at your organisation while setting the right chord for continuous feedback and constant development, prioritizing employee performance reviews is a must.

Now that we know what employee work review entails, let’s see why holding staff performance review sessions becomes an unmissable activity in a company.

Also read: Employee Survey- How to Craft the Best Questionnaire? 

Importance of Conducting Performance Review for Employees

Conducting performance reviews for employees is a crucial aspect of effective human resource management within any organization. These reviews serve several important purposes, contributing to the growth and success of both the individual employee and the company as a whole.

While talking about the essence of appraisal feedback to employee post-review, it is crucial to understand that performance evaluations are an ongoing thing. You just can’t stop doing it on the pretext that you had held one many years ago. It is not an one-time thing. Evaluation for employee performance has to be a continuous thing.

66% of companies following the approach of continuous performance management succeeded in executing productivity improvements throughout the year.

Companies that embrace the idea of continuous performance evaluation for employees outperform their competitors by 24%. Here are some key reasons why performance reviews are important:

1. Makes Room for Feedback and Communication

Performance reviews provide a structured forum for managers to offer constructive feedback to employees. This feedback can include recognition of achievements and identification of areas for improvement. It opens up a two-way communication channel, allowing employees to express their concerns or aspirations, fostering a more open and transparent work environment.

2. Offers a Broad Scope for Goal Setting and Alignment

Performance reviews help set clear and measurable objectives for employees. When employees understand what is expected of them, they are more likely to work towards the organization’s goals, thus aligning their efforts with the company’s mission and vision. As a result,

3. Fosters Development and Training

Performance reviews identify an employee’s strengths and weaknesses. This information is invaluable for designing training and development programs tailored to individual needs. It ensures that employees have the necessary skills and knowledge to excel in their roles and adapt to changing circumstances.

4. Brings in Motivation and Recognition

Recognition and appreciation of an employee’s hard work and achievements can boost morale and motivation. Knowing that their contributions are acknowledged and valued, employees are more likely to remain engaged and committed to their work.

5. Boosts Employee Performance

Performance reviews provide a basis for addressing performance issues. When problems or deficiencies are identified, managers can work with employees to create improvement plans and offer the necessary support to help them succeed in their roles.

6. Aids in Succession Planning

Identifying high-potential employees during performance reviews can help in succession planning. It allows organizations to groom and prepare individuals for leadership roles, reducing the impact of key personnel turnover.

7. Ensures Fair Compensation

Performance reviews often play a role in determining compensation, bonuses, or raises. By evaluating an employee’s contributions and achievements, organizations can fairly reward their efforts, which can be essential for retaining top talent.

8. Legal and Ethical Considerations

Performance reviews can help in documenting an employee’s performance over time. This documentation can be crucial in legal matters, such as disputes, disciplinary actions, or terminations, to ensure that decisions are made fairly and based on objective data.

9. Assists in Team Building and Collaboration

Performance reviews can also address an employee’s ability to work within a team, fostering a collaborative and harmonious work environment. Identifying and resolving conflicts or communication issues can lead to a more productive and cohesive team.

10. Ensures Overall Organizational Improvement

When individual employees receive feedback and develop their skills, it contributes to the organization’s growth and improvement. Regular performance reviews can lead to a more skilled and motivated workforce, which benefits the company’s long-term success.

Suggested Read: Top 10 Payroll Software for Accountants in 2023

performance review

Who Runs an Employee Performance Review Process?

What is the Best Approach for Performance Reviews for Employees?

Here comes the most confusing part of conducting performance reviews. With diverse HR practices, performance management strategies and tools being found in plenty, there won’t ever be any standard performance reviewing plan. As is obvious, no two employee performance review processes will be alike. While some companies follow rating or grading system, others follow the format of a questionnaire. Some even prefer to go with a free-form style.

Every organisation is distinct in terms of their culture and the way they carry out various processes. As is obvious, you will choose a strategy that fits your company goals and brings value. Performance reviews for employees, in general, aid in boosting employee engagement, productivity and fosters a healthy and thriving work culture. By now, it is clear that the goal of every employee performance review is the same. Despite that, studies have revealed that traditional method of conducting performance review for employees doesn’t fetch positive outcomes. Rather, it makes the entire process boring, hard to follow, and demotivating.

Need for a Modern & Efficient Performance Management System

Traditional performance management system is not really preferred by managers and employees. An online research report published in the Journal of Industrial and Organisational Psychology has shed light on crucial insights:

  • 59% of surveyed employees said that Performance Management reviews are a waste of time. Further, another 56% of them said that they did not receive apt feedback on the exact areas of improvement.
  • 95% of managers responded that they are not satisfied with their Performance Management Systems.
  • 90% of HR heads are of the view that their existing Performance Management Systems don’t fetch the right output.

All these point towards the fact that adopting a modern and power-packed Performance Management tool is going to be the most prudent thing to do. The smarter the PM system is, the more efficient it will be at engaging employees and elevate work satisfaction levels. Therefore, instead of fixating your mind on conducting annual reviews with a traditional approach, switching to an efficient Performance Management System is going to work wonders. In that way, you can maintain a consistent feedback culture which is crucial in boosting employee morale and engagement.

What should a Performance Review Assess?

A performance review  of employees should assess various aspects to provide a comprehensive evaluation of their work. Here are the key areas to consider:

  • Job-specific skills
  • Job knowledge
  • Quality of work
  • Productivity and efficiency
  • Communication
  • Problem-solving and decision-making skills
  • Initiative and innovation
  • Teamwork and collaboration
  • Leadership (if applicable, depending upon the job role)
  • Goal achievement
  • Adaptability
  • Attendance and punctuality
  • Customer service (if relevant)
  • Ethics and professionalism
  • Self-development
  • Holistic performance

It is important to bear in mind that reviewing employee performance needs to be a constructive dialogue between the employee and the manager, focusing on both past achievements and future development. After all, the core aim behind indulging in performance appraisal in HRM is to motivate employees, recognize their contributions, and support their growth within the organization.

As per a Gallup research report, 32% of employees quit their job recently owing to utter lack of promotional chances. This, once again, reiterates the need for consistent performance reviews and subsequent quality of work appraisal comments. 

What to Write or Say in a Performance Review for Employees?

As a constituent of performance management strategies, holding performance review for employees is crucial. It is obvious for the question to arise as to what is to be written in a performance review for employees. Before we get into comprehending this, it is important to understand that performance review for employees offers the right scope to discuss their strengths and weaknesses. Therefore, while writing performance review comments for employees, the fine line that blurs being helpful and responding in a critical way needs to be adhered.

Ideally, performance review and feedback entails writing a careful evaluation of an employee’s achievements while charting out a data-intensive analysis of their areas of strength, weaknesses, and areas that require further improvement. In a report by Gallup, it was revealed that only 21% of US employees agree to have received meaningful feedback from their employers. This once again points to the need of writing effective performance review comments for employees. Ideal feedback is the one that doesn’t express strong despise or apply harsh words towards the performance of any employee. Inculcate an encouraging tone in the performance review feedback so that the employees realize that they need to perform better next time.

Let’s have a look at a few instances to understand how to go about giving performance review employee comments.

1. Put Repercussions Into Context

While writing performance review for employees, explain how the performance and actions of an employee will have direct repercussions on other team members.

how to write a performance review for employees

2. Instill a Note of Positivity in the Feedback

It is very important to emphasize the positive note in the content that you write as performance review for employees. While highlighting the strengths of an employee, make sure to offer constructive criticism on the things that they could have done better. Adding a tone of encouragement is a must.

Do's and don'ts of writing performance review for employees

3. Mention How The Employees Can Better Their Performance By Bringing Up Their Past Actions

Instead of asking your employees to transform their skills for better completely, take into context their past performance and suggest improvements based on that.

Performance review examples

Differences Between Traditional and Modern Employee Performance Review

Parameters Traditional Employee Performance Review  Modern Employee Performance Review 
Frequency and Timing Typically conducted annually. Can be more frequent, such as quarterly or even ongoing feedback, allowing for real-time adjustments.
Format Often a formal, structured meeting with a manager, involving lengthy forms and ratings. Emphasizes flexibility and may include informal discussions, peer reviews, and technology-driven platforms.
Focus Primarily retrospective, looking at past performance and historical data. Emphasizes a forward-looking approach, focusing on continuous improvement and development.
Performance Metrics Tends to rely on rigid rating scales and standardized criteria. May use a variety of qualitative and quantitative metrics tailored to individual roles and goals.
Feedback Typically a one-way conversation from the manager to the employee. Encourages two-way feedback, including self-assessment and peer feedback, promoting open communication.
Development and Coaching Often limited to identifying areas for improvement and setting goals. Includes coaching and support for skill development and career growth.
Recognition May not place a strong emphasis on acknowledging and celebrating achievements. Recognizes and rewards outstanding performance, fostering motivation and engagement.
Documentation Requires extensive paperwork and record-keeping. May use digital tools for easier documentation and data analysis.
Employee Involvement Employees might feel less engaged and empowered in the process. Encourages employees to take an active role in managing their performance and career.
Alignment with Organisational Goals May not always link individual performance to broader company objectives. Aims to ensure that individual goals and performance align with organizational goals.

Performance Management System

How to Take Advance Preparations to Conduct a Performance Review Process for Employees?

Being a manager or company leader entails taking care of every aspect of performance appraisal process. Just as the fundamental fact goes: “People join companies, but they leave managers.” This is because it is upon the managers of an organization to pay heed to employee performance assessment, give the necessary feedback, and boost employee engagement rate.

The solution lies in mixing up things. Try combining self-evaluation with other performance assessment methods to mitigate some of these drawbacks and provide a more comprehensive view of an employee’s performance.

c) 360-degree Performance Review Process

A 360-degree performance review process, also known as a multi-rater or 360 feedback, is a comprehensive evaluation method that gathers feedback on an employee’s performance from multiple sources, including supervisors, peers, subordinates, and sometimes external stakeholders. This holistic approach aims to provide a well-rounded assessment of an individual’s strengths and weaknesses.

Benefits

1. Comprehensive Feedback: Offers a broader perspective on an employee’s performance, capturing insights from different angles.
2. Self-awareness: Helps employees gain a better understanding of their strengths and areas for improvement.
3. Fairness: Reduces bias and encourages a more balanced and objective evaluation.
4. Development: Provides valuable input for personalized development plans.
5. Team Collaboration: Can enhance teamwork and communication by fostering open feedback.

Drawbacks

1. Time-Consuming: Gathering feedback from multiple sources can be labor-intensive.
2. Complexity: Interpreting and synthesizing diverse feedback can be challenging.
3. Potential for Conflict: Conflicting opinions from different raters may create tensions.
4. Lack of Anonymity: In small teams, anonymity may be difficult to maintain.
5. Inconsistency: Rater bias and inconsistencies in feedback quality can be issues.

Despite these drawbacks, when implemented effectively, the 360-degree performance review process can be a valuable tool for promoting growth and development within an organization.

d) Rating Performance Review Process

A rating performance review process is a method of evaluating an employee’s performance using a numerical or qualitative rating scale. It typically involves assessing various aspects of an employee’s job performance, such as skills, productivity, and behavior, and assigning scores or ratings to each of these areas.

Benefits

1. Standardization: It provides a structured and standardized way to assess performance, making it easier to compare employees and identify areas for improvement.
2. Clear Feedback: Ratings can provide clear feedback to employees about their strengths and weaknesses, helping them understand expectations.
3. Compensation and Promotion: It can be used to determine salary increases, bonuses, and promotions, aligning rewards with performance.

Drawbacks

1. Subjectivity: Ratings can be influenced by the biases and opinions of the reviewer, leading to unfair assessments.
2. Stress and Anxiety: Employees may experience stress and anxiety, especially if the process is perceived as punitive.
3. Lack of Development: Focusing on ratings may shift attention away from employee development, as employees may prioritize scoring well over personal growth.

Depending upon your specific needs, you need to decide whether a rating-based performance review system is suitable for their specific needs.

Now that you are aware of the nitty-gritty of various types of employee performance reviews, it is time to fixate your mind on either one of these types or using a combination of all kinds. Usually, the prudent thing to do is amalgamating all the types to get a holistic view of employee performance.

2. Decide on the Performance Review Frequency 

Ascertaining how often the employee performance review will take place in your organization is crucial. As is obvious, you won’t want to disrupt day-to-day operations and other pre-scheduled company events. Depending upon the job role and department, you may want to stick to different performance review cadences.

Let’s take a look at the diverse rhythms of performance evaluations.

a) Annual Performance Review

An annual employee performance review is a formal evaluation process where an employee’s work performance, achievements, and areas for improvement are assessed by their supervisor or manager once a year.

Whether it’s suitable for an organization depends on various factors. Annual reviews have both advantages and disadvantages. They can provide structured feedback, set expectations, and aid in performance improvement. However, some argue they can be infrequent, demotivating, and not capture real-time performance.

The suitability depends on an organization’s culture, industry, and the specific needs and preferences of its employees and management. Some companies are moving towards more frequent, ongoing feedback systems to address these issues. Further, studies show that 51% of employees believe annual performance reviews are inaccurate and don’t paint the true picture. Therefore, it is a wise idea to shift from an annual system to a more continuous one, say, monthly or quarterly.

b) Semi-annual Performance Review

A semi-annual employee performance review is a process where employees receive feedback on their job performance and discuss their goals and development with their managers twice a year. It typically involves a structured assessment of an employee’s achievements, strengths, and areas for improvement.

This form of job performance review can be beneficial for organizations that value regular feedback, ongoing performance improvement, and employee development. However, it may not be ideal for all companies, as some may prefer annual or more frequent reviews based on their operational requirements and work culture. After all, the suitability of the process should align with an organization’s goals and objectives.

Semi-annual performance review can be a favorable option for managers who wish to strike a balance between the annual and quarterly intervals of assessing employee work performance.

c) Quarterly Performance Review

A quarterly employee performance review process is a systematic evaluation of an employee’s work and achievements conducted every three months. Quarterly reviews can be beneficial for frequent feedback and goal alignment in fast-paced environments, but they may be resource-intensive and may not suit all company cultures or job roles. The suitability should be assessed on a case-by-case basis.

You can use quarterly reviews to check how employees are striding forward to achieve certain goals. Basically, this performance review cadence can suit in those instances when you need to trace employee progression on a particular project.

d) Ad-hoc Performance Review

An ad-hoc performance review process is organized on an “as needed” basis. Instead of adhering to a fixed annual or periodic review schedule, it allows managers and employees to engage in performance discussions when the requirement emerges. This approach is often more flexible and can address specific issues or achievements in real-time.

This performance evaluation cadence can be beneficial in dynamic environments where feedback needs to be timely, or when a more traditional review schedule is not practical. However, it may lack structure and consistency, which could be a drawback for organizations requiring standardized performance assessments. A balanced approach could involve a combination of ad-hoc and regular reviews to meet the organization’s needs.

Newly established companies may find this frequency suitable till the time they hire more employees or figure out a way of planning review cycles.

e) Continuous Performance Review

A continuous performance review process is an approach to performance management where feedback and evaluation occur on an ongoing basis throughout the year, rather than just during an annual or periodic review. This can be held weekly, bi-weekly or in some cases, even daily.

Continuous performance reviews can be beneficial in many cases, as they promote timely feedback, better employee development, and alignment with organizational goals. However, they may not be suitable for organizations that lack the resources or infrastructure to support frequent interactions.

80% of surveyed employees prefer continuous, immediate feedback to the traditional system of annual reviews. This centralizes the importance of giving priority to a system of continuous employee performance review. If you can afford to do it frequently, there can probably be nothing better than this.

3. Hold a Calibration Meeting to Determine the Performance Review Evaluation Criteria

To select the evaluation criteria for performance review process, holding a calibration meeting with the HR department and managers is essential. After all, assessing varied job roles demand the application of different performance rating scales.

Let’s have a look at the types of evaluations that you can adopt, depending upon the requirements.

a) Quantitative Evaluations for Performance Review

Quantitative evaluations in employee performance reviews involve assessing an employee’s performance using numerical data and metrics, known as Key Performance Indicators or KPIs. This approach focuses on objective, measurable results and is often suitable for roles with well-defined, quantifiable goals.

For example, in sales positions, you could use quantitative criteria such as:

  • Sales Revenue: Measure the actual sales generated by the employee, comparing it to targets or past performance.
  • Conversion Rates: Assess how many leads or prospects the employee converts into actual sales.
  • Sales Volume: Evaluate the number of products or services sold within a specific time frame.
  • Customer Satisfaction Scores: Utilize customer feedback and ratings to gauge the employee’s performance in delivering a positive customer experience.

Quantitative evaluations provide a clear and data-driven assessment of employee performance, making them particularly useful in roles where output and outcomes can be easily quantified. However, it’s important to supplement these metrics with qualitative evaluations to gain a more holistic view of an employee’s performance.

b) Qualitative Evaluations for Performance Review

Qualitative evaluations entail assessing an employee’s soft skills, behavior, and subjective attributes. These are typically measured through narratives, anecdotes, and descriptive feedback rather than quantitative metrics. Further, qualitative criteria provide a well-rounded view of an employee’s contributions and potential areas for improvement.

For instance, a suitable scenario for qualitative evaluations is assessing leadership skills. Instead of relying solely on quantitative data like sales numbers, a manager might provide qualitative feedback on how an employee demonstrates leadership qualities, such as mentoring team members, fostering collaboration, and inspiring others. Moreover, qualitative evaluations can also be valuable for assessing communication skills, adaptability, teamwork, and customer service, where it’s important to consider the nuances of interpersonal interactions and attitude.

You may choose to combine both quantitative and qualitative evaluations to track employee performance at work. Using a smart Performance Management System, such as Asanify, can help you monitor employee progress by configuring the platform with the KPIs, goals, and OKR against which the final verdict related to employee performance will be given.

4. Design the Employee Performance Review Workflow

Crafting the employee performance review workflow is all about structuring actions in order as to what will take precedence after a particular step. While finalizing the workflow, make sure that you are taking these into account:

  • Participants: That is, who all will be involved in an employee’s performance evaluation process.
  • Deadlines: That is, marking the dates as to when the review cycle commences and nears a conclusion, and by when each stakeholder needs to complete reviewing the parts they have been assigned.
  • Training: That is, ascertaining if any newly hired professionals need training to understand the intricacies of employee performance review process.
  • Adoption of Strategies Post-review: That is, deliberating on the aftermath of the performance review process. This will include taking decisions as to who all are getting promotions or raises.

If this left your head spinning, leave all your worries to an innovative Performance Management System that will automate the entire workflow in seconds. It’s time to simplify work, and save your precious time.

5. Use STAR Approach to Complete the Performance Review Process

Now is the time to complete employee performance reviews! You can use the STAR approach to make things easier.

  • Situation: Begin by providing context. Describe the situation or task the employee was assigned. What was the challenge or project they were working on?
  • Task: Explain the specific responsibilities and objectives the employee was tasked with. What were their goals and expectations?
  • Action: Detail the actions the employee took to address the situation or task. What steps did they follow? What skills or strategies did they use?
  • Result: Highlight the outcomes and results of the employee’s actions. Did they meet or exceed their goals? Use quantifiable metrics if possible.

6. Scheduling Employee Performance Review Meeting

Conducting an employee performance review meeting effectively involves several key steps:

  • Preparation: Review the employee’s performance throughout the evaluation period. Further, you may also want to gather feedback from colleagues, clients, and other relevant sources.
  • Set Goals and Expectations:  Collaborate with the employee to establish clear, SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals for the upcoming period. Moreover, you can also discuss expectations and provide guidance on how they can improve in their areas of weakness.
  • Feedback and Discussion: Listen actively to the employee’s responses and concerns. Further, it is important to address any questions or issues they raise.
  • Documentation:  Make sure to document the key points discussed during the meeting. Moreover, make it a point to ensure that both you and the employee understand what was discussed and agreed upon.

7. Usual Follow-up After the Performance Review Process Gets Over 

Once the performance evaluation meeting gets over, it is time to do the follow-up and draft actionable strategies to be implemented with an aim to trigger higher employee engagement. Actions that you need to undertake as the last step in the aftermath of organizing employee performance review process include:

  • Recognition and Rewards: Outstanding performance may be rewarded with recognition, bonuses, promotions, or other incentives to motivate the employee to continue their high-level performance.
  • Performance Improvement Plans (PIPs): If performance is below expectations, a Performance Improvement Plan (PIP) may be initiated to help the employee address their deficiencies and meet the required standards.
  • Training and Development: Training opportunities, workshops, or courses may be recommended to help the employee enhance their skills and knowledge.
  • Regular Check-Ins: Follow-up meetings may be scheduled to track progress, discuss challenges, and make necessary adjustments.
  • Reevaluation: Employee performance should be periodically reevaluated to assess progress and determine if further adjustments are necessary.

One in five employees is not confident as to whether their managers will provide them with consistent feedback. (Source: Quantum Workplace)

performance review

No matter what work you strive to complete, stumbling blocks will rear their heads to delay your activity. And, reviewing employee performance is not excluded from it. Therefore, it is of supreme importance that you stay aware of common pitfalls.

76% of employees aspire to obtain performance reviews and feedback monthly, and not annually. (Source: TruQu)

Frequently Asked Questions- Employee Performance Review Process

1. What is an employee performance review?

An employee performance review is a structured assessment of an employee’s job performance over a specific period. It’s a way for employers to provide feedback and discuss strengths, weaknesses, and areas for improvement.

2. What is the purpose of a performance review?

Performance reviews serve several purposes, including evaluating an employee’s contributions, setting goals, providing feedback, and identifying opportunities for career development and improvement.

3. How can I give constructive feedback during a performance review as a manager?

When giving feedback, be specific, provide examples, and focus on behaviors and outcomes. Offer praise for strengths and suggest improvements with actionable steps.

4. How are performance ratings determined, and what do they mean?

Performance ratings are typically based on established criteria, such as job responsibilities and goals. The meanings of ratings can vary by company, but they often range from “exceeds expectations” to “needs improvement.”

5. Can a performance review impact employee compensation or promotion?

Yes, performance reviews often play a role in determining pay raises, bonuses, promotions, and career development opportunities. A positive review can lead to increased rewards and advancement.

6. What is a 6-month performance review?

A mid-year or 6-month performance review refers to evaluation or appraisal that is held every 6 months.

7. What are the 4C’s performance review?

The 4C’s here include: Context, Content, Consequences, and Change.

8. What if an employee disagrees with their performance review?

In situations like these, make sure to listen to their perspective, encourage open dialogue, and consider their feedback. If necessary, you can have a follow-up meeting to address any discrepancies.

9. Are there legal considerations I should be aware of during performance reviews?

Yes, it is important to be mindful of employment laws and regulations. Ensure fairness, avoid discrimination, and document the review thoroughly for future reference.

10. How can I support an employee’s development after a review?

Create an action plan with the employee, provide resources for skill development, and schedule follow-up meetings to track progress and offer guidance.

Not to be considered as tax, legal, financial or HR advice. Regulations change over time so please consult a lawyer, accountant  or Labour Law  expert for specific guidance.

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