Job Evaluation - Methods, Remuneration Components, Wages

1. Job Evaluation
• Job Evaluation is a systematic way of determining the
value/worth of a Job in relation to other jobs in an
organization. It tries to make a systematic comparison
between jobs to assess their relative worth for the
purpose of establishing a rational pay structure.
• Job evaluation needs to be differentiated from Job
Analysis. Job Analysis is a systematic way of
gathering information about a job. Every job
evaluation method requires at least some basic job
analysis in order to provide factual information about
the jobs concerned.

2. Principles of Job Evaluation
• Definition: Identifiable & Easily Distinguishable.
• Evaluation: A Job evaluation scheme, used as a
standard.
• Job Understanding: Job Evaluators need to have
deep insights into the Job Design Process.
• Concern: Concerned with Job not Person
• Assessment: By Competent People

3. Job Evaluation – Methods
Non – Analytical
Methods
Ranking
Classification
Analytical Methods
Factor
Comparison
Point

4. Employee Remuneration
• Employee Remuneration refers to the reward or
compensation given to the employees for their work
performances. Salaries constitute an important source
of income for employees and determine their
standards of living.
• “If you pick the right people and give them the
opportunity to spread their wings - and put
compensation and rewards as a carrier behind it - you
almost don’t have to manage them.” — Jack Welch

5. Methods of Remuneration
• Time Rate Method:
• Remuneration is directly linked with the time
spent.
• A Pre-decided amount hourly, daily, weekly or
monthly.
• Time Rate method leads to quality output.
• Piece Rate Method:
• Remuneration is linked with pieces produced.
• Emphasis is more on quantity output.
• The per unit cost of production is low.

6. Components of Remuneration
• Job Description
• Made up of responsibilities, functions, duties,
location of the job and the other factors like
environment, etc.
• Job Evaluation
• Factors like Experience, Qualifications, Expertise
and Need of the company.
• Salary Surveys
• Different companies in the same industry are
paying for similar roles ? ? ?

7. Factors Affect Compensation
• Macroeconomic Situation
• Firm's Performance Vs. Performance of the
Economy.
• Demand – A Particular Skill
• Premium skills like Consulting and Accountancy.
• Position of the Company in the Business Cycle
• ESOP’s or Employee Stock Option Plans.
• Urgency of the Firm
• Wants Employees to come on board as quickly as
possible.

8. Wages
• According to Prof. Benham, “A wage may be defined
as a sum of money, paid under contract by an
employer to a worker for services rendered.” Thus,
remuneration or reward of a labourer engaged in
production for the physical or mental work is known
as wage in Economics.
Determination of Wage
Demand for labour & Supply of Labour
Wage Structure
• Skill Based
• Competency Based

9. Wages – Concepts
• Minimum wage:
• For the nourishment of the worker’s family, for his
efficiency, for the education of his family members,
for their medical care and for some amenities.
• Fair Wage depends upon:
• Productivity of labour & Prevailing rates of wages
• Level of the national income & its distribution
• Living Wage:
• Not only the food, clothing and shelter but a
measure of economical comfort, including
education for his children, protection against ill-
health, and a measure of insurance.

10. Real Wage
• The income of an individual or group after taking into
consideration the effects of inflation on purchasing
power. For example, if you received a 2% salary rise
over the previous year and inflation for the previous
year was 1%, then your real income only rose 1%.
Conversely, if you received a 2% raise in salary and
inflation stood at 3%, then your real income would have
shrunk 1%.
• Real Wage = Nominal Wage
Price Level