How to evaluate personnel

It would be easy to evaluate performance if everybody (including the evaluator) was of high quality and there was no Dunning–Kruger effect. Your only criteria would be years of experience. Unfortunately, real life is more complex than that and there are large differences between employees.

The next best thing might be to have three bins: low, average, high. The low bin might be for fresh graduates who just started to work. The high bin consists of people who are highly productive and experienced.

You divide your staff according to their general level into these bins. Each bin has a lower and upper salary bound. Then you rank the people in each bin according to their productivity. I know that realistically measuring productivity is a tough problem but there is no escaping from it. For example, you have to decide if the person with 3 months of overtime had really productive overtimes or was just producing 8 hours of work in 12 hours. In each bin, at the top of the pyramid should be people with high productive overtime and at the bottom should be persons with no or low productive overtime. That way, you assure that everybody gets their fair share and productive individuals get their extra.