How are other organizations approaching applying an annual performance rating for employees who can't be rated against objectives due to long term leave during the performance year?

The organization can determine a set period of absence (e.g 6 mths) that then exempts the individual from the performance rating. In most cases, leaders need to be sensitive to potential biases on performance from valid significant absences and calibrate assessments accordingly. 

There are processes and then there's culture - 2 elements that come together that decide if it will work or not. 

In situations where employees are on long-term leave and cannot be rated against specific objectives, the approach to applying an annual performance rating may vary case by case. Managers typically use discretion, considering factors such as the length of the leave to confirm if there were employee's accomplishments during the period worked, and the potential to adjust goals if there is time for the employee to demonstrate deliverables upon return. In such cases, the performance review may lean towards a more qualitative assessment to evaluate the employee's overall contributions and impact. If on leave during the entire process, we may use e default rating result for those instances.