Investment in human resources can have good pay offs. Every good performance deserves an equivalent reward after a proper assessment. When the performance is not rewarded properly, there is ill feeling in the mind of the performer and that results in poor performance. Performance Appraisal system is one such instrument that can bring in good returns on investment. The information it provides is highly useful in providing basis for promotion, transfer and termination. This system will help in enhancing employees effectiveness, identifying their training and development needs, aiding wage administration, developing inter-personal relationship and communication and taking corrective steps to achieve the set standards. The continuous process of informal Performance Appraisal is carried out throughout the year by the employers, whereas the formal Performance Appraisal system will have periodical formal evaluation of the appraisee by the appraiser. This appraisal also helps the employer or the appraiser to know more about the circumstances under which his appraisee is working and the difficulties he is experiencing. The appraisee should also understand how he himself is responsible for some achievements and non-achievements