What should an annual appraisal letter format include?

An annual appraisal letter format should include all standard components plus: the specific fiscal year or appraisal cycle being reviewed, a year-in-review section highlighting 2–3 key achievements, the annual increment percentage, the revised annual CTC, and goals or KPIs for the upcoming year.

How is an appraisal letter different from an increment letter?

An appraisal letter is the most comprehensive document – it covers performance rating, specific achievements, salary revision, any promotion, and future expectations. An increment letter is narrower – it communicates only the approved salary hike with previous CTC, new CTC, and effective date. The appraisal letter essentially contains the increment letter as a subset.

Who issues the appraisal letter?

The HR department is responsible for drafting and issuing appraisal letters. They are typically signed by the HR Manager or an authorised signatory. In smaller organisations, the direct manager or CEO may issue it. The letter must always be on official company letterhead and marked CONFIDENTIAL.

How often should appraisal letters be issued?

Annual appraisals are most common – issued once a year, typically at the end of the financial year. Half-yearly appraisals are common in fast-growth startups. Quarterly appraisals are rare but used in highly performance-driven or sales-focused roles.

What is Annexure A in an appraisal letter?

Annexure A is a detailed salary breakup table attached to the appraisal letter. It lists all components of the employee's revised monthly compensation – Basic Salary, HRA, Special Allowance, LTA, Medical Allowance, PF, and ESI contributions – along with the gross monthly CTC. It also includes a mandatory tax deduction note.

Can an employee request an appraisal letter?

Yes. If an employee has completed their appraisal cycle but has not yet received their appraisal letter, they can formally request one from HR – referencing their employee ID, appraisal review period, and verbal or email communication about the outcome.

Appraisal Letter Format

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Letter Details

Company Name *

Employee Name *

Employee ID

Current Designation

Revised Designation

Current Annual CTC (₹) *

New Annual CTC (₹) *

Effective Date *

Appraisal Year / Cycle

HR Manager Name

HR Designation

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Date:

APPRAISAL LETTER - CONFIDENTIAL

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HR Manager Name

Designation

Disclaimer: This tool is provided to help you generate HR documents based on the details you enter. Please note that the letter formats shared are generic and may differ from company to company. While Razorpay strives to offer reliable and useful outputs, the results may not always be tailored to your specific business or legal needs. Razorpay does not guarantee the absolute accuracy of the generated content and cannot be held responsible for any discrepancies, outcomes, or decisions that stem from using this tool. By continuing to use the tool, you acknowledge and accept full responsibility for any documents or results derived from it.

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What is an Appraisal Letter?

Quick Definition

An appraisal letter is a formal HR document issued to an employee after their performance review cycle. It communicates the performance assessment outcome, salary revision, increment percentage, new CTC, effective date, and any promotions or bonuses earned.

An appraisal letter is a written document issued by a company's HR department to an employee following the completion of their performance review cycle. It formally communicates the results of the appraisal – including the employee's performance rating, salary revision, revised CTC, increment percentage, effective date, and any promotions or bonuses.

Also referred to as an appraisal letter format document or performance appraisal letter, it serves as both an official record and a motivational tool – recognising the employee's contributions and outlining expectations for the next cycle. A well-crafted annual appraisal letter does not just state a number – it acknowledges specific achievements, validates the employee's efforts, and sets the tone for the next performance cycle.

Why is an Appraisal Letter Important?

An appraisal letter is far more than a formality. Here is why it matters for both employees and the organisation:

Recognises Contribution

Formally acknowledges the employee's hard work, achievements, and value to the organisation.

Official Record

Creates a documented trail of performance outcomes, salary revisions, and promotion decisions.

Communicates Revised CTC

Clearly states the new CTC, increment amount or percentage, and effective date – reducing disputes.

Motivates Performance

A well-worded appraisal letter motivates the employee to maintain or exceed performance in the next cycle.

Sets Future Expectations

Outlines what the company expects from the employee in the upcoming appraisal period.

Legal & Payroll Reference

Serves as the reference document for payroll updates, tax filings, and any future compensation disputes.

Appraisal Letter Format – Key Components

Every appraisal letter format – whether annual, half-yearly, or quarterly – must include these essential components to be complete, professional, and legally sound:

#	Component	What to Include
1	Company Letterhead & Date	Official letterhead with company logo, address, and issuance date. Mark as CONFIDENTIAL.
2	Employee Details	Full name, employee ID, designation, and department.
3	Subject Line	"Appraisal Letter" or "Annual Appraisal Letter – [Employee Name] \| [Year]"
4	Opening – Performance Recognition	Acknowledge the employee's contributions warmly and specifically. Avoid generic phrases.
5	Performance Highlights	Briefly call out 2–3 specific achievements or contributions from the appraisal cycle.
6	Revised Designation	If a promotion is included, clearly state the new title and reporting structure.
7	Revised CTC & Increment	State previous CTC, new CTC, increment amount, and percentage clearly.
8	Effective Date	The exact date from which the revised compensation and/or designation takes effect.
9	Salary Breakup (Annexure A)	A detailed month-wise salary structure showing all components and deductions.
10	Future Expectations	Brief, constructive note on goals and expectations for the upcoming cycle.
11	Closing & Signature	Warm closing by the HR Manager or authorised signatory. Request acknowledgement.

How to Write an Appraisal Letter – Step-by-Step

Follow these steps to write a professional appraisal letter that motivates the employee while maintaining accuracy and legal soundness:

Issue on Official Letterhead
Always use the company's official letterhead. Mark it CONFIDENTIAL – appraisal details are sensitive and should not be shared without authorisation.
Open with Genuine Recognition
Lead with a specific acknowledgement of the employee's contributions – not a generic line. Reference actual projects, outcomes, or behaviours where possible.
Call Out Key Achievements
Include 2–3 specific accomplishments from the appraisal cycle with measurable outcomes. This is what makes the letter memorable and motivating.
State the Revised Designation Clearly
If a promotion is included, clearly mention the old and new title, the department, and the effective date of the change.
Be Precise About the CTC Revision
State the previous CTC, the new CTC, the increment amount, and the percentage increase explicitly. Ambiguity here leads to disputes.
Specify the Effective Date
The date from which the new salary and/or designation takes effect must be unambiguous – this drives payroll updates.
Attach the Salary Breakup as Annexure A
Include a full, itemised salary structure showing basic, HRA, special allowance, LTA, PF, ESI, and net take-home. Always include the tax deduction note.
Add a Forward-Looking Expectation Note
Close with a brief, constructive paragraph on what you expect from the employee in the next cycle. Keep it positive and specific.
Request Signed Acknowledgement
Ask the employee to sign and return a duplicate copy – this creates a legally valid record of acceptance.

Appraisal Letter Template, Sample & Format – Free (All Types)

Below are six ready-to-use appraisal letter templates covering every common scenario. Each follows the standard annual appraisal letter format – copy, customise the brackets, and issue on company letterhead.

Template 1 – Standard Annual Appraisal Letter FormatMost Used

Template 2 – Appraisal Letter with PromotionWith Promotion

Template 3 – Half-Yearly Appraisal Letter FormatMid-Year / Half-Yearly

Template 4 – Appraisal Letter with Performance Rating (No Salary Revision)Performance-Only

Template 5 – Filled Appraisal Letter Sample (Real-World Example)Complete Example

Template 6 – Appraisal Letter with Performance BonusBonus Included

Appraisal Letter Annexure A – Salary Breakup Format

Every appraisal letter template should include a detailed salary breakup as Annexure A. Here is the standard format used in Indian organisations:

Salary Component	Monthly Amount (INR)
Basic Salary	INR [Amount]
HRA (House Rent Allowance)	INR [Amount]
Special Allowance	INR [Amount]
Leave & Travel Allowance (LTA)	INR [Amount]
Medical Allowance	INR [Amount]
PF Employer Contribution	INR [Amount]
ESI Employer Contribution (if applicable)	INR [Amount]
Gross Monthly CTC	INR [Total]

Frequently Asked Questions (FAQs)

An appraisal letter is a formal document issued by the HR department after an employee's performance review cycle. It communicates the performance assessment outcome including the employee's rating, achievements acknowledged, salary revision (old CTC, new CTC, increment percentage), effective date, and any promotion or bonus details. It also includes a salary breakup as Annexure A and may include expectations for the next cycle.

The standard appraisal letter format includes: company letterhead marked CONFIDENTIAL, date, employee name and ID, a warm opening acknowledging contributions, specific performance highlights, revised designation (if applicable), previous and new CTC, increment amount and percentage, effective date, Annexure A with full salary breakup, a forward-looking expectation note, and a request for signed acknowledgement.

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