A job evaluation is a systematic way of determining the value/worth of a job in relation to other jobs in an organization.

1. Compensation Management
Module 2 – MG University

2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com

3. Job Evaluation - Introduction
Compensation Management

4. Job Evaluation
• A job evaluation is a
systematic way of
determining the
value/worth of a job in
relation to other jobs in
an organization.

5. Job Evaluation
• It tries to make a
systematic comparison
between jobs to assess
their relative worth for the
purpose of establishing a
rational pay structure.

6. Job Evaluation
• Job evaluation needs to
be differentiated from
job analysis. Job analysis
is a systematic way of
gathering information
about a job.

7. Job Evaluation
• Every job evaluation
method requires at least
some basic job analysis in
order to provide factual
information about the jobs
concerned.

8. Job Evaluation
• Thus, job evaluation
begins with job analysis
and ends at that point
where the worth of a job is
ascertained for achieving
pay equity between jobs.

9. Job Evaluation Process
Compensation Management

10. Job Evaluation Process
• The process of job evaluation
involves the following steps:
– Gaining acceptance.
– Creating job evaluation committee.
– Finding the jobs to be evaluated.
– Analyzing and preparing job
description.
– Selecting the method of evaluation.
– Classifying jobs.

11. Job Evaluation Process
• Gaining acceptance:
– Before undertaking job evaluation,
top management must explain the
aims) and uses of the programme
to the employees and unions. To
elaborate the program further, oral
presentations could be made.
Letters, booklets could be used to
classify all relevant aspects of the
job evaluation programme.

12. Job Evaluation Process
• Creating job evaluation
committee:
– It is not possible for a single person
to evaluate all the key jobs in an
organization. Usually a job
evaluation committee consisting of
experienced employees, union
representatives and HR experts is
created to set the ball rolling.

13. Job Evaluation Process
• Finding the jobs to be evaluated:
– Every job need not be evaluated.
This may be too taxing and costly.
Certain key jobs in each department
may be identified. While picking up
the jobs, care must be taken to
ensure that they represent the type
of work performed in that
department.

14. Job Evaluation Process
• Analyzing and preparing
job description:
– This requires the
preparation of a job
description and also an
analysis of job needs for
successful performance .

15. Job Evaluation Process
• Selecting the method of
evaluation:
– The most important method
of evaluating the jobs must be
identified now, keeping the
job factors as well as
organizational demands in
mind.

16. Job Evaluation Process
• Classifying jobs:
– The relative worth of various jobs in an
organisation may be found out after
arranging jobs in order of importance
using criteria such as skill
requirements, experience needed,
under which conditions job is
performed, type of responsibilities to
be shouldered, degree of supervision
needed, the amount of stress caused
by the job, etc.

17. Job Evaluation Process
• Classifying jobs:
– Weights can be assigned to
each such factor. When we
finally add all the weights, the
worth of a job is determined.
The points may then be
converted into monetary
values.

18. Benefits of Job Evaluation
Compensation Management

19. Benefits of Job Evaluation
• It tries to link
pay with the
requirements
of the job.

20. Benefits of Job Evaluation
• It offers a systematic procedure
for determining the relative
worth of jobs. Jobs are ranked
on the basis of rational criteria
such as skill, education,
experience, responsibilities,
hazards, etc., and are priced
accordingly.

21. Benefits of Job Evaluation
• An equitable wage structure
is a natural outcome of job
evaluation. An unbiased job
evaluation tends to
eliminate salary inequities by
placing jobs having similar
requirements in the same
salary range.

22. Benefits of Job Evaluation
• Employees as well as unions
participate as members of
job evaluation committees,
while determining rate
grades for different jobs.
This helps in solving wage
related grievances quickly.

23. Benefits of Job Evaluation
• Job evaluation, when
conducted properly and
with care, helps in the
evaluation of new jobs.

24. Benefits of Job Evaluation
• It points out possibilities of
more appropriate use of the
plant's labour force by
indicating jobs that need
more or less skilled workers
than those who are manning
these jobs currently.

25. Methods of Job Evaluation
Compensation Management

26. Methods of Job Evaluation
• There are primarily
three methods of job
evaluation:
– (1) ranking.
– (2) classification.
– (3) Factor comparison
method or Point
method.

27. Ranking Method of Job Evaluation
Compensation Management

28. Ranking method
• Perhaps the simplest
method of job evaluation is
the ranking method.
According to this method,
jobs are arranged from
highest to lowest, in order of
their value or merit to the
organization. obs can also be
arranged according to the
relative difficulty in
performing them.

29. Ranking method
• The jobs are examined as
a whole rather than on
the basis of important
factors in the job; the job
at the top of the list has
the highest value and
obviously the job at the
bottom of the list will
have the lowest value.

30. Ranking method
• Jobs are usually ranked
in each department
and then the
department rankings
are combined to
develop an
organizational ranking.

31. Ranking method
• The variation in payment of
salaries depends on the
variation of the nature of
the job performed by the
employees. The ranking
method is simple to
understand and practice
and it is best suited for a
small organization.

32. Ranking method
• Its simplicity however
works to its
disadvantage in big
organizations because
rankings are difficult to
develop in a large,
complex organization.

33. Ranking method
• Moreover, this kind of
ranking is highly
subjective in nature
and may offend many
employees. Therefore,
a more scientific and
fruitful way of job
evaluation is called for.

34. Classification/Grading Method of Job Evaluation
Compensation Management

35. Classification/Grading Method of Job Evaluation
• According to this
method, a
predetermined
number of job
groups or job classes
are established and
jobs are assigned to
these classifications.

36. Classification/Grading Method of Job Evaluation
• This method places
groups of jobs into job
classes or job grades.
Separate classes may
include office, clerical,
managerial, personnel,
etc.

37. Classification/Grading Method of Job Evaluation
• Following is a brief
description of such a
classification in an
office.
– Class I - Executives:
Further classification
under this category
may be Office Manager,
Deputy office manager,
Office superintendent,
Departmental
supervisor, etc.

38. Classification/Grading Method of Job Evaluation
• Following is a brief
description of such a
classification in an
office.
– Class II - Skilled
workers: Under this
category may come
the Purchasing
assistant, Cashier,
Receipts clerk, etc.

39. Classification/Grading Method of Job Evaluation
• Following is a brief
description of such a
classification in an
office.
– Class III - Semiskilled
workers: Under this
category may come
Stenotypists, Machine-
operators, Switchboard
operator etc.

40. Classification/Grading Method of Job Evaluation
• Following is a brief
description of such a
classification in an
office.
– Class IV - Unskilled
workers: This category
may comprise peons,
messengers, house
keeping staff, File clerks,
Office boys, etc.

41. Classification/Grading Method of Job Evaluation
• The job grading method
is less subjective when
compared to the earlier
ranking method. The
system is very easy to
understand and
acceptable to almost all
employees without
hesitation.

42. Classification/Grading Method of Job Evaluation
• One strong point in
favour of the method is
that it takes into account
all the factors that a job
comprises. This system
can be effectively used
for a variety of jobs.

43. Classification/Grading Method of Job Evaluation
• The weaknesses of the
Grading method are:
– Even when the
requirements of different
jobs differ, they may be
combined into a single
category, depending on
the status a job carries.
– It is difficult to write all-
inclusive descriptions of a
grade.

44. Classification/Grading Method of Job Evaluation
• The weaknesses of the
Grading method are:
– The method oversimplifies
sharp differences between
different jobs and different
grades.
– When individual job
descriptions and grade
descriptions do not match
well, the evaluators have
the tendency to classify the
job using their subjective
judgements.

45. Factor Comparison/Point Method of Job Evaluation
Compensation Management

46. Factor Comparison/Point Method of Job Evaluation
• This method is
widely used and is
considered to be one
of the reliable and
systematic approach
for job evaluation in
mid and large size
organisations.

47. Factor Comparison/Point Method of Job Evaluation
• Most consulting
firms adopt this
method, which was
pioneered by
Edward Hay in 1943.
Here, jobs are
expressed in terms
of key factors.

48. Factor Comparison/Point Method of Job Evaluation
• Points are assigned to each
factor after prioritizing
each factor in order of
importance. The points are
summed up to determine
the wage rate for the job.
Jobs with similar point
totals are placed in similar
pay grades.

49. Factor Comparison/Point Method of Job Evaluation
• The procedure
involved may be
explained thus:
–1. Select key jobs.
Identify the factors
common to all the
identified jobs
such as skill, effort,
responsibility, etc.

50. Factor Comparison/Point Method of Job Evaluation
• The procedure
involved may be
explained thus:
– 2. Divide each major
factor into a number
of sub factors. Each
sub factor is defined
and expressed
clearly in the order
of importance,
preferably along a
scale.

51. Factor Comparison/Point Method of Job Evaluation
• The procedure
involved may be
explained thus:
– 4. Once the worth
of a job in terms of
total points is
expressed, the
points are converted
into money values
keeping in view the
hourly/daily wage
rates.

52. Merits and demerits - Method of Job Evaluation
Compensation Management

53. Merits and demerits
• The point method is a
superior and widely
used method of
evaluating jobs. It
forces raters to look
into all key factors and
sub-factors of a job.

54. Merits and demerits
• Point values are assigned
to all factors in a
systematic way,
eliminating bias at every
stage. It is reliable
because raters using
similar criteria would get
more or less similar
answers.

55. Merits and demerits
• The methodology
underlying the approach
contributes to a
minimum of rating error.
It accounts for
differences in wage rates
for various jobs on the
strength of job factors.

56. Merits and demerits
• Jobs may change over
time, but the rating
scales established under
the point method remain
unaffected.

57. Merits and demerits
• On the negative side, the
point method is complex.
Preparing a manual for
various jobs, fixing values
for key and sub-factors,
establishing wage rates for
different grades, etc., is a
time consuming process.

58. Limitations of Method of Job Evaluation
Compensation Management

59. Limitations of Method of Job Evaluation
• Job evaluation is not
completely scientific.
• The most of the
techniques are difficult
to understand, even for
the supervisors.

60. Limitations of Method of Job Evaluation
• The factors taken by the
programme are not
exhaustive.
• There may be wide
fluctuations in compensable
factors in view of changes in
technology, values and
aspirations of employers,
etc.

61. Limitations of Method of Job Evaluation
• Employees, trade union
leaders, management
and the programme
operators may assign
different weight to
different factors, thus
creating grounds for
dispute.

62. Computer Aided Job Evaluation
Compensation Management

63. Computer Aided Job Evaluation
• Job evaluation has come
a long way. Today,
computer aided job
evaluation is the state of
art.

64. Computer Aided Job Evaluation
• The advantages of computer
aided job evaluation (CAJE)
include simplification of job
analysis, ability to keep job
description up to date,
increased objectivity of the
evaluation, less time spend in
committee meeting etc.

65. Computer Aided Job Evaluation
• An additional advantage
of the use of a
computerized system is
the increased reliability
that can be obtained.

66. Computer Aided Job Evaluation
• Computer aided job
evaluation features
computerized checking of
questionnaire answers and
automated output of both job
evaluation and relevant
compensation reports.

67. Computer Aided Job Evaluation
• CAJE is not an expert
system. It makes no
decisions. It records,
processes and calculates
data relevant to job
evaluation.

68. Computer Aided Job Evaluation
• CAJE simplifies and
streamlines the routine work
in job evaluation. Even
though CAJE allow us to
capture and use information
about job in new ways, they
are only as good as their
designers.

69. Computer Aided Job Evaluation
• There are three main reasons
why expert system
technology should be used for
a Computerized job
evaluation system.
– Decision of this kind require
expert input and
compensation expertise is
scarce.

70. Computer Aided Job Evaluation
• There are three main reasons why
expert system technology should be
used for a Computerized job
evaluation system.
– A high degree of uncertainty is
present in job evaluation
because job tasks, compensation
policies, laws and regulations are
constantly changing.

71. Computer Aided Job Evaluation
• There are three main reasons why
expert system technology should be
used for a Computerized job
evaluation system.
– Conventional programming
techniques cannot adequately
handle job evaluation because of
programming difficulty and
development costs.

72. Pay Structures
Compensation Management

73. Pay Structures
• Once job analysis has
been done organizations
need to decide upon the
pay structures.

74. Pay Structures
• Pay structure refers to
the process of setting up
the pay for a job in an
organization.

75. Pay Structures
• The process deals with
internal and external
analysis to estimate the
compensation package
for a job profile.

76. Pay Structures
• Internal equity, External equity
and Individual equity are the
most popular pay structures.
Job description provides the in
depth knowledge about the job
profile and its worth.

77. Internal Equity
Pay Structures

78. Internal Equity
• The internal equity
method undertakes the
job position in the
organizational hierarchy.

79. Internal Equity
• The process aims at balancing
the compensation provided
to a job profile in comparison
to the compensation
provided to its senior and
junior level in the hierarchy.

80. Internal Equity
• “Internal equity exists when
employees in an organization
perceive that they are being
rewarded fairly according to
the relative value of their jobs
within an organization”.

81. Internal Equity
• Another way of stating this is to say
that a person’s perception of their
responsibilities, rewards and work
conditions is seen as fair or equitable
when compared with those of other
employees in similar positions in the
same organization.

82. Internal Equity
• An internal equity study can
determine if there is pay
equity between like-
positions and if all roles in
the organization are
governed by the same
compensation guidelines.

83. Internal Equity
• Usually each role is assigned
a pay range with
corresponding criteria that
outlines how to determine
where an employee should
be placed in the range.

84. Internal Equity
• The fairness is ensured
using job ranking, job
classification, level of
management, level of
status and factor
comparison.

85. Internal Equity

86. Example
• An agency may employ a
number of social workers to
work with similar client
groups. By reviewing the
salary of each employee and
comparing it with others in
the same role, you will be
able to determine if internal
equity exists.

87. Example
• This does not mean that all
employees are paid the
same; it means that they are
paid fairly in relation to
other staff in the same role.
Differences in salary may be
based on education,
experience, years of service,
or responsibility level.

88. External Equity
Pay Structures

89. External Equity
• “External equity exists when
employees in an
organization perceive that
they are being rewarded
fairly in relation to those
who perform similar jobs in
other organizations”.

90. External Equity
• External equity exists when
an organization's pay rates
are at least equal to the
average rates in the
organization’s market or
sector.

91. External Equity
• Employers want to ensure
that they are able to pay
what is necessary to find,
keep and motivate an
adequate number of
qualified employees.
Creating a compensation
structure that starts with
competitive base pay is
critical.

92. External Equity
• Employees also compare
their roles and pay to roles
and pay in other
organizations. Unfortunately
they do not always compare
with similar types of
organizations or even in the
same sector.

93. External Equity
• Generally, employees
consider much more than
base pay in determining
external equity. For some
more emphasis may be
placed on employee
benefits, job security,
physical work environment
or the opportunity for
advancement in deciding if
external equity exists.

94. External Equity
• The use of salary surveys is
critical in your ability to
determine if your
compensation and benefits
are comparable to similar
roles in other organizations.

95. External Equity
• It is important to ensure that
the key responsibilities and
goals of the roles being
compared are similar; as is
the sector the organization is
aligned with.

96. External Equity

97. Example
• A number of nonprofit
organizations have tried to
address quality of life
concerns by only requiring
full-time employees to work
a 35-hour week, while many
other organizations require
their employees to work
37.5 or even 40 hours per
week.

98. Example
• It is important that if the
base pay for a specific role
from group one was to be
compared to the same role
in group two, that the
difference in hours is
understood and accounted
for.

99. Example
• While the difference in hours
may seem small, if a person
who worked a 37.5 hour week
made $40,000/year, they
would be making $20.51/hour.
If the person working the 35-
hour week were also being
paid $20.51/hour, their annual
salary would only be $37,328
per year. This could seem
inequitable unless the
difference in hours was clear.

100. Salary Surveys
Compensation Management

101. Salary Surveys
• Surveys collecting
information about employee
compensation, including
salary and benefits, are
commonly called salary
surveys.

102. Salary Surveys
• Salary surveys are conducted
with numerous employers to
determine pay levels for
specific job categories and
are generally conducted
either by region, sector or
job classification for the
purposes of comparability.

103. Salary Surveys
• In conjunction with other
tools, salary surveys can
provide useful information
to attract, support and retain
employees within the
context of an overall HR and
organizational plan.

104. Salary Surveys
• When designed and used
properly, salary surveys can
provide useful
benchmarking information
for comparing salaries and
benefits.

105. Salary Surveys
• A salary survey is a standard
method of finding out what
other organizations are
paying for specific jobs or
job classes. Large
organizations in particular,
routinely conduct
compensation surveys to
determine prevailing pay
rates and benefits.

106. Salary Surveys
• These surveys not only determine
the low, high and average salaries
for a given position, but also
provide a sense of what other
organizations are paying.
Organizations may purchase
results of surveys conducted by a
variety of organizations proficient
in the collection, analysis and
distribution of salary data, or
they may choose to conduct their
own salary survey.

107. Assessing Salary Surveys
Compensation Management

108. Salary Surveys
• A key to successfully using
the data contained in a
salary survey is to
understand the assumptions
and criteria used to collect
the information.

109. Salary Surveys
• Finding surveys that clearly
report the basis for
collection and dissemination
of information will help you
to ensure that you are
referencing a survey that is
relevant for your
organization.

110. Salary Surveys
• Review job descriptions or
position profiles in the
survey report
– It is important to look at job
duties and responsibilities not
just job title when deciding if
salary survey information is
comparable. To be
comparable the jobs must
have a similar level of
responsibility and range of
duties.

111. Salary Surveys
• Note province and region.
– Appropriate salary comparisons
will come from agencies with a
similar geographic focus: local,
regional, provincial or national.
At the local level, the best salary
comparisons will come from
other organizations in the same
city or town. Good salary
comparison may come from a
different city or town with similar
labor market characteristics and
a similar cost of living.

112. Salary Surveys
• Note operating budgets of
respondent organizations
– As a general rule larger
operating budgets mean
higher salaries. Comparable
salaries come from
organizations of a comparable
size. Size is usually estimated
by using the operating budget
or looking at the number of
paid full-time staff.

113. Salary Surveys
• Note the types and descriptions
of respondent organizations
– Are the functions, services offered,
clientele, and sources of funding of
the organizations in the salary
survey comparable to your
organization? For example, an
organization providing childcare
services through provincial funding
may have very different salaries
than an organization providing
parent/child resources through its
own fundraising.

114. Salary Surveys
• Note the education level and
(full/part-time/union/contract)
status of respondents
– The level of education
required for a job and the type
of employment arrangement
can have an impact on
salaries.

115. Salary Surveys
• Note the year of data collection
and the date of the report
– Labor market forces can result
in significant changes in
salaries in a short period of
time. More recent data will be
more useful in establishing
current salaries.

116. Salary Surveys
• Note if the survey is a one-time
event or if it's repeated
– Surveys that have been
repeated provide an added
advantage of showing trends
in salaries over the years of
the survey.

117. Evaluate its validity
• It’s important to ensure that
the salary survey was
conducted in an objective,
valid and reliable manner.
What are the sampling
frame, sample size and
response rate? What is the
margin of error? Is it
reported?

118. Evaluate its validity
• For information to be valid it
has to come from a large
enough sample size. For
example, if you collected just
three salaries for the same
position and one salary is
high, one is low, and one is
in the middle, you wouldn't
be able to conclude much
because your sample is too
small to provide valid and
useful information.

119. Evaluate its validity
• You also want to be sure that
the information is reliable.
Reliability means that the
survey gives consistent results.
You should therefore carefully
consider how the information
is gathered and decide if it
makes sense to you.

120. Evaluate its validity
• For example, if the survey
instrument is included in the
report, assess if it would be
easy for you to give accurate
answers to the questions.

121. Rate its usability
• A good salary survey will
define terms and provide
the user with enough
information to help him or
her easily understand the
data. Technical terms should
be explained or defined and
the report should be
comprehensible to non-
specialists.

122. Look at all of the numbers
• The actual salary paid to an
individual will be influenced
in part by the person's years
of experience and
qualifications. Therefore, the
salary range for a position
provides more useful
information than the actual
salary an individual is being
paid.

123. Look at all of the numbers
• Other statistical information
such as median - the value in
the middle when all the
values are arranged from
lowest to highest - will also
help make sense of the data.

124. Consider the total compensation
package
• Having information on the
total compensation package
- retirement plan (pension or
RRSP), bonuses, benefits and
salary - allows for better
comparisons. Without this
information you might make
wrong assumptions about
salary level and not have the
full picture.

125. Consider the total compensation
package
• For example, in a situation
where no benefits are
provided, many people
(particularly those in higher
positions) will negotiate for
higher salaries. Without
seeing the whole
compensation package, you
might not understand that
the high salary compensates
for no benefits.