This paper studies the employer's perspectives regarding performance appraisal and reward philosophy and the effect of demographic variables on it. The sample is selected on the basis of convenient sampling method. This study is based on the hypothesis that demographic variables and employers' opinions are independent of each other. This paper analyzes the data by using factor analysis, reliability tests and chi-square Tests.

In most organizations today, performance appraisal and designing reward system has become a core area of attention for managing human resources to stimulate them to perform efficiently. Performance appraisal is the step where the management finds out how effective it has been in hiring and placing employees and acts as an approach towards managing and developing the employees aiming at the overall achievement of the organization's objectives. Traditional methods of performance appraisal emphasized only on the tasks of the employees which is almost inexistent in the present competitive scenario. Today, employees not only want the appraisal on the basis of tasks, but also on the basis of their overall contribution and performance in the organization in the form of rewards. Performance here means both behavior and results. Performance appraisal schemes almost always include an overall rating of the individual. Rewarding employees on the basis of their contribution aims to address the employees' value on the overall employment relationship. Reward philosophy of the organization focuses on the formulation and implementation of strategies and policies that ensure fairness, equitably and consistency among the employees. This study addresses demographic differences between employers with regard to perceptions of performance appraisal and reward philosophy in their organizations.

Lemieux et al. (2007) studied the effect of the growing incidence of performance- based pay on wage inequality. The basic premise of the paper is concentrated on the fact that performance-based pay jobs that reward productive characteristics of workers have a more `competitive' pay structure than other factors. They analyzed that compensation in performance pay jobs is more closely tied to both measured and unmeasured productive characteristics of workers. They also concluded that the growing incidence of performance pay accounts for 25 percent of the growth in male wage inequality between the late 1970s and the early 1990s, and for most of the growth in top-end wage inequality during this period.

Management Reseach Journal, Performance Appraisal, Reward Philosophy, Insurance Sector, Literature Review, Health Services, Chi-square Analysis, Cronbach's Alpha, Data Interpretation, Indian Insurance Sector, Human Resources, Performance appraisal Schemes, Null Hypothesis.