Employees are very important to the success of any organisation. They are the fulcrum that holds the organisation together and they have also been described as the major assets of the organisation. Thus, the main aim of this study is to investigate the relationship between Performance Appraisal and work engagement among SMEs in Malaysia. Drawing upon Job demands-resources theory, this empirical study developed a conceptual framework tested using quantitative method. The study focuses on small and medium enterprises in Malaysia. The unit of analysis is at the level of individual employees who work with these SMEs. While the Independent variable is Performance Appraisal, the dependent variable is Work engagement measured using three constructs namely: Vigour, Absorption and Dedication. This study utilised confirmatory factor analysis (CFA) and structural equation modeling (PLS-SEM) using both SPSS and SmartPLS software. The findings show that Performance Appraisal has a positive significant relationship with work engagement. This study contributes significantly to the body of literature in the areas of employee retention and engagement. Theoretically, the study further expands the SET and JD-R theories by building a framework that empirically tested the relationship between performance appraisal and work engagement.
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