Institute of Personnel Management Sri Lanka

Professional Qualification in Human Resource Management

Stage : One / Module 04

Subject : Compensation Management

Session : 4.2. Job Evaluation

Sunday, 21st Aug 2011

PQHRM. 4.2. Job Evaluation
Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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Learning Objectives

 Purpose and key features of Job Evaluation

 Job Evaluation methodology – process
 Job Evaluation Methods / Techniques
 The determination of pay rates based on Job Evaluation
 Computerized Job evaluation System

INTRODUCTION TO JOB EVALUATION

Definition – Job Evaluation

“Job Evaluation is a systematic comparison done in order to determine the worth of one job
relative to another”
by Edwin B. Flippo
Introduction – Job Evaluation

• “Job Evaluation is a systematic comparison done in order to determine the worth of one job
relative to another.” Also it is a system of comparing different jobs to provide a basis for a
grading and pay structure.

• Assess employee contribution

• Establish and qualify differences in employee contribution across jobs.
• These differences provide a foundation for employee compensation decisions.

• Assess job content and value

• Job content refers to the type of work performed and the skills and knowledge
necessary to perform the work.
• Job value refers to the job's degree of contribution in meeting the organization's
goals and the degree of difficulty in filling the job.

• It establishes the size (how big is the job) and value (the contribution a person has made) of
jobs in an organization.

• Therefore, job evaluation is a process of determining the worth of each job to be performed,
ranking and grading each job with respective requirement of skill, knowledge,
responsibility…etc; for fixing wage or reward payable to the jobholder.

Principles of Job Evaluation

• Rate the job and not the man

Job evaluation should be done only to rate the job and not the employees performing them.
The evaluator should understand that the job requirement is fixed and definite.

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 • Easily explainable elements of rating
The elements selected for rating purpose should be easily explainable. The elements
selected should be few and should cover the essential requisite of every job.

• Exposure of plan to employees and their participation

The process of job evaluation should be told to employees. Employees should be given
clear-cut explanation and maximum co-operation should be garnered from them.

Objectives of Job Evaluation

• To gather job information. To gather data and information relating to job descriptions, job
specifications and employee specifications of various jobs in an organization.
• To fix up responsibilities. To compare the duties, responsibilities and demands of a job with
that of other jobs.
• To determine the hierarchy and place of various jobs in an organization.
• To determine the ranks or grades of various jobs.
• To establish relativities between jobs.
• To use these job grades for salary administration. To ensure fair & equitable wages on the
basis of relative worth or value of jobs.

• A successful job evaluation system can help us to make the organization's pay system
• equitable
• understandable
• legally defensible
• approachable
• externally competitive.

JOB EVALUATION METHODOLOGY – PROCESS

The process of job evaluation is lengthy and has to be taken in a systematic manner. The process of
job evaluation involves the following steps:

1. Securing acceptance from employees

2. Forming job evaluation committee / panel
3. Deciding the jobs to be evaluated
4. Analyzing and preparing job description
5. Selecting the method of evaluation
6. Classifying Jobs
7. Executing the programme
8. Periodical review

The process in detail

1. Securing acceptance from employees

Before starting the process of job evaluation, the management must explain the purpose and
uses of the job evaluation programme to the employees. The acceptance of the job
evaluation programme by the employees will also avoid possible opposition from them in the
future.
PQHRM. 4.2. Job Evaluation
Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 2. Forming job evaluation committee / panel
A single person should not be entrusted with the responsibility to evaluate all the key jobs in
an organization. A committee of experienced employees and HR experts should be created
for this purpose.

3. Deciding the jobs to be evaluated

Evaluating every job in the organization is time consuming and costly. So, only important jobs
are evaluated. For this, certain key jobs in each department are identified and evaluated.

4. Analyzing and preparing job description

In this step, the job selected for evaluation is analyzed in great detail. This is necessary for the
preparation of job description and it's successful performance.

5. Selecting the method of evaluation

In this step, the method of job evaluation is selected. The method is selected keeping the job
factors and organizational demands in mind. The benefits of job evaluation is available only
when the method selected is appropriate.

6. Classifying Jobs
In this step, the relative worth of various jobs is found out and arranged in order of
importance. This classification of jobs on the basis of weightage is a major step in the process
of job evaluation.

7. Executing the programme

Once the job evaluation process is over, the management must explain it to the employees
and solve their doubts. After this, the action plan is put into execution.

8. Periodical review
Job evaluation is a ever changing process and it requires periodical review. In the absence of
periodical review all the relevant job factors will not be evaluated properly.

Forming job evaluation committee / panel

• Job evaluation is done by a panel of people in order to minimize the biases and prejudices.
The main two reasons for doing so:

• First the panel should include several people who are familiar with the jobs in question,
each of whom may have a different perspective regarding the nature of the jobs.

• Second, if the panel is composed at least partly of employees, the panel approach can help
ensure greater employee acceptance of the job evaluation results.

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 Job Evaluation Methods / Techniques

• Before implementing job evaluation in your organization, select the most appropriate job
evaluation method.

• Five job evaluation systems are most commonly used:

Non-Quantitative Techniques

Market Pricing Method

• This method tries to understand the importance of a particular job to that particular
industry and rank them accordingly.

• The highly important ones are placed high in the organization chart (Ex – Tea taster in the
tea broker Company, Fashion Designer in the Garment industry, Software Developer in the IT
industry)

• The characteristics of this method:

• Not a formal job evaluation methodology
• Often used by smaller organizations
• Does not assess relative internal work, only criteria is the labour market
• Influenced by the pay levels set by other employees
• Difficult- jobs are not the same in all organizations
• Does not consider economic conditions, employer size & other variables

Ranking Method

• Ranking jobs is the easiest, fastest, and least expensive approach to job evaluation.

• This method ranks each job relative to all other jobs, usually based on some overall factors
like “job difficulty” & “the degree of importance of the job to the organization” and rank all
the jobs from the most important to the least important. The evaluator has to appraise and
rank the jobs but not the incumbents.

• For example, a job-ranking system might rank the job of CEO as the most valued job within
the organization and the job of Office Assistant as the least valued.

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 • Advantages
• This method is very simple, quick and cheaper in terms of time and money
• It is also easy to communicate the results to employees, and it is easy to understand.

• Disadvantages
• Ranking jobs is subjective / Subject to bias
• A tendency to rely too heavily on “guesstimates”
• Ranking provide no yardstick for quantifying the value of one job relative to another

Job Classification (or Job Grading) Method

• It is a simple, widely used method in which raters categorize jobs into groups; all the jobs in
each group are of roughly the same value for pay purposes.

• The groups are called classes if they contain similar jobs, or grades if they contain jobs that
are similar in difficulty but otherwise different

• Under this method, jobs at different levels in the organizational hierarchy are divided into
various grades, with a clear-cut definition of each grade.

• Grades are formulated on the basis of nature of tasks, requirements of skill, knowledge, and
responsibilities & authority of various jobs.

• There are several steps in the mechanism of this method.

• Decide initially the number of pay grades to be set up
• Identify those jobs (the benchmarks) which everyone can agree as most
representative of each grade
• Define class or grade descriptions for each grade in terms of amount or level of job
factors in the jobs. Eg: How much independent judgment, skill, physical effort
• Prepare grade descriptions for all other jobs, taking these benchmarks jobs into
consideration
• Compare all jobs with benchmarks jobs and on the basis of the comparison, slot
each into the grade, which they seem most, clearly belong to.

Notes / comments

• Advantages
• It automatically groups the employer’s jobs into classes
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Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 • This method is simple to operate & easily understood
• New jobs can easily be fitted into the grading structure

• Disadvantages
• Considerable judgment is required to apply them
• Some jobs may fall into two or three categories
• Subjective judgment

Quantitative Techniques

Points Rating Method

• Point rating method is the most widely used job evaluation method.

• This method is analytical in the sense that jobs are broken into components for purposes of
comparison. It is quantitative as each component of the job is assigned a numerical value.

• It involves identifying;
• Several compensable factors – (Ex. compensable factors are skills required, level of
decision-making authority, number of reporting staff members, and working
conditions)
• The degree to which each of these factors is present in the job – A different number
of points is usually assigned for each degree of each factor.

Points Rating Method – steps

Step 1: Determine clusters of jobs to be evaluated

• The first step is usually to cluster jobs, for example, into sales jobs, clerical jobs, shop jobs,
factory jobs… Then the committee will generally develop a point plan for one group or
cluster at a time.

Step 2: Collect Job Information

• This means performing a job analysis & writing JDs and JSs.

Step 3: Select Compensable factors

• Select compensable factors, like skills, responsibility, physical requirements or job
conditions.
• Each cluster of jobs may require its own compensable factors.
• The following factors may be considered for this purpose.
• Skill – Education, training, judgment, analysis, mental complexity, mental dexterity,
adaptability…etc
• Effort – Physical demand, visual effort, concentration, mental effort, alertness….etc
• Responsibility – For preventing monetary loss, machines, materials, safety
policy..etc
• Job Conditions – Working conditions, hazards, Risk, etc

Step 4: Define Compensable Factors

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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• Next, carefully design each compensable factor. Appendix 1 shows the compensable factors
& factor degrees(described in step 5)

Step 5: Define Factor Degrees

• Define each of several degrees for each factor so that raters may judge the amount or
degree of a factor existing in a job. The number of degrees usually does not exceed 5 or 6.

Appendix 01 - Examples of definitions of degrees

Notes / comments

Step 6: Determine relative Values of factors

PQHRM. 4.2. Job Evaluation
Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 • The next step is to decide how much weight (or how many total points) to assign to each
factor. This is important because for each cluster of jobs some factors are bound to be more
important than others. Thus, for executives the “mental requirements” factor would carry
far more weight than would “physical requirements”. The opposite might be true of factory
jobs.

Step 7: Assign point values to Factors & Degrees

• In step 6, total weights were developed for each factor in percentage terms. Now assign
points to each factor as in Appendix 02. For eg, suppose it is decided to use a total no. of
600 points in the point plan, Because the factor “skill requirement” had a weight of 15%, it
would be assigned a total of 15% x 600 = 90 points.

• Thus, it was decided to assign 90 points to the “skill requirement” factor. This automatically
means that the highest degree for the skill requirement factor would also carry 90.

• Then assign points to the other degrees for these factors, usually in equal amounts from the
lowest to the highest degree. Do this for each factor as in Appendix 02.

Step 8: Rate the jobs

• Each job based on its JD & JS is evaluated, factor by factor to determine the number of
points that should be assigned to it. First, committee members determine the degree (first
degree, second degree and so on) (Appendix 01)to each factor is present in the job.

• Then they know the corresponding points (Appendix 2) that were previously assigned to
each of these degrees (in step 7).

• Finally they adapt the points for all factors, arriving at a total point value for the jobs.

Appendix 02 - Example of point evaluation plan

PQHRM. 4.2. Job Evaluation
Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 Notes / comments

Appendix 03 – sample Job Evaluation form

Notes / comments

Factor Comparison Method

PQHRM. 4.2. Job Evaluation
Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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 • It has many variations and appears to be the most accurate, the most complex and one of
the most widely used job evaluation methods.

• This is a person-to-person system of merit rating to job evaluation.

• Factor comparison method entails deciding which jobs have more of the chosen
compensable factors. The method is actually a refinement of the ranking method. With the
ranking method, you generally look at each job as an entity and rank the jobs on some
overall factor like job difficulty. With the factor comparison method, you rank each job
several times- once for each of several compensable factors.

• For example, you might first rank jobs in terms of the compensable factor “skill”. Then rank
them according to their “mental requirements” and so forth.

• Then combine the rankings for each job into an overall numerical rating for the job. The
pricing of all jobs is based upon the prices established on the key jobs.

• The factor comparison thus incorporates a job-to-job type of rating. This too is a widely
used method.

• Advantages
• This method results in customized job-ranking
• It is an accurate, systematic, quantifiable method
• Jobs are compared to other jobs to determine a relative value
• Disadvantages
• Time consuming and subjective process.
• Complexity is probably the most serious disadvantage (how to build one)
• Five factors which are used for all organizations are quite outdated & for all jobs in
an Organization may not always be appropriate.

THE DETERMINATION OF PAY RATES BASED ON JOB EVALUATION - WAGE FIXATION PROCESS

Wage Fixation Process

Notes

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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  Stage 1 – Conduct the Salary Survey - A survey aimed at determining prevailing wage Rates
and specific wage rates for specific jobs.
 Stage 2 – Determine worth of each jobs - Job evaluation
 Stage 3 – Group similar jobs into pay grades - A pay grade comprised of jobs of approx. equal
difficulty
 Stage 4 – Wage Curves – Wage curve shows relationships between the value of the job and
average wage paid for the job
 Stage 5 – Fine and Tune Pay Rates

7 criteria for effective Wage Fixation Process

Thomas Patten suggests 7 criteria for effectiveness of any Reward policy;

 Adequate – Minimum, Govt, Union individual levels to be met
 Equitable – Each person is paid in line with his or her contribution, abilities
 Balanced – Pay benefits and other rewards should constitute a reasonable package.
 Cost effective – Pay is not excessive considering what the employer can afford
 Incentive providing – Pay motivates effective and productive work
 Acceptable to employees – The employee understands the pay system and feels it is
a reasonable system for the enterprise and them
 Secure – Assured of receipt of pay/ benefits without interruption

COMPUTERIZED JOB EVALUATION SYSTEM

• Using quantitative job evaluation methods such as the point of factor comparison planes can
be time – consuming.

• CAJE – Computer Aided Job Evaluation – can streamline this process. CAJE can simplify job
analysis, help keep JDs up to date, increase evaluation objectivity, reduce the time spent in
committee meetings, and ease the burden of system maintenance. CAJE includes electronic
data entry, computerized checking of compensable factor questionnaire responses, and
automated out put of job evaluations and of a variety of compensation reports.

• CAJE allow the computer program to price job more or less automatically, by assigning
points or factor comparison rankings to things like no of employees reporting to the
positions, prices of benchmark jobs, current pay, and current pay midpoints.

INTRODUCING AND MAINTAINING JOB EVALUATION

• It could be claimed that every time a decision is made on what the holder of a job should be
paid, it requires a form of job evaluation. Job evaluation is therefore unavoidable, but it
shouldn’t be intuitive, subjective and potentially biased process.

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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• The issue is how best to carry it out analytically, fairly, systematically, consistently ,
transparently, and as far as possible objectively, without being bureaucratic inflexible or
resource intensive.

PQHRM. 4.2. Job Evaluation

Shanaka Fernando – 077 3856963, Shanaka.fernando@wns.com
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