UNIT - II

DEVELOPING COMPENSATION PROGRAMS

Job Evaluation-Basic systems- Time wage-Piece wage-Wage payments and Total Salary
Structure-Compensation Surveys-Hay Plan-Developing Competitive Compensation
Programs-Developing Salary Structures-planning a Job Analysis Program-Measuring Cost-
to–Company (CTC).

Job evaluation is the process of analyzing and assessing various jobs systematically to
ascertain their relative worth in an organization.
Job evaluation:
Job evaluation developed out of civil service classification practices and some early employer
job and pay classification systems. Formal job evaluation began with the United States Civil
Service Commission with Frederick W. Taylor in 1881, it is now over 139 years old and
still of great value. The first point system was developed in the 1920s. Employer associations
have contributed greatly to the adoption of certain plans. The spread of unionism has
influenced the installation of job evaluation in that employers gave more attention to
rationalized wage structures as unionism advanced. During World War II, the National War
Labor Board encouraged the expansion of job evaluation as a method of reducing wage
inequities.
Definition: In the words of Edwin B. Flippo. "Job evaluation is a systematic and orderly
process of determining the worth of a job in relation to other jobs."
According to Bethel, Atwater and Smith et at, "Job evaluation as a personal term has both a
specific and genetic meaning specifically, it means job rating or the grading of occupations in
terms of duties ; generally it means the entire field of wages and salary administration along
modern lines"
Job Evaluation Process: Job analysis describes a job. Job evaluation develops a plan for
comparing jobs in terms of those things the organization considers important determinants of
job worth. This process involves a number of steps that will be briefly stated here and then
discussed more fully.
 Job Analysis. The first step is a study of the jobs in the organization. Through job
analysis, information on job content is obtained, together with an appreciation of worker
requirements for successful performance of the job. This information is recorded in the
precise, consistent language of a job description.
 Compensable Factors: The next step is deciding what the organization "is paying for" --
that is, what factor or factors place one job at a higher level in the job hierarchy than
another. These compensable factors are the yardsticks used to determine the relative
position of jobs. In a sense, choosing compensable factors is the heart of job evaluation.
Not only do these factors place jobs in the organization's job hierarchy, but they also
serve to inform job incumbents which contributions are rewarded.
What are Compensable factors?
Compensable factors:
 Experience level-
 Educational qualifications
 Working Condition
 Confidential Data
 Consequences of mistakes and errors
 Complexity of duties
 Responsibility
 Mental and physical demands
 Developing the Method: The third step in job evaluation is to select a method of
appraising the organization's jobs according to the factor(s) chosen. The method should
permit consistent placement of the organization's jobs containing more of the factors
higher in the job hierarchy, than those jobs lower in the hierarchy.
 Job Structure: The fourth step is comparing jobs to develop a job structure. This
involves choosing and assigning decision makers, job category, level, and setting up the
job hierarchy.
Wage Structure: The final step is pricing the job structure to arrive at a wage structure. It is
also known as a salary structure, a system that determines how much an employee is to be
paid as a salary or wage, based on one or more compensable factors such as the employee's
experience level, rank or level within the organization, the length of time that the employee
has stayed in organization (total service), complexity of duties and the difficulty of the
specific work. Performed

Features of Job Evaluation:

The primary objective of job evaluation is to find out the value of work, but this is a value
which varies from time to time and from place to place under the influence of certain
economic pressure, not least of which is the worth of money itself. The main features of job
evaluations are:
 To supply bases for wage negotiation founded on facts rather than on vague
intermediate ideas.
 It attempts to assess jobs, not people.
 Job evaluation is the output provided by job analysis.
 Job evaluation does not design wage structure, it helps in rationalizing the system by
reducing number of separate and different rates.
 Job evaluation is not made by individuals rather it is done by group of experts.
 Job evaluation determines the value of job. Further the value of each of the aspects
such as skill and responsibility levels are also related and studied in connection with
the job.
 Job evaluation helps the management to maintain high levels of employee
productivity and employee satisfaction.
Objectives:
 To justify an existing pay rate structure or to develop one that provides for internal
equity.
 To assist in setting pay rates that are comparable to those of in similar jobs in other
organizations to compete in market place for best talent.
  To provide a rational basis for negotiating pay rates when bargaining collectively with
a recognized union.
 To ensure the fair and equitable compensation of employees in relation to their duties.
 To ensure equity in pay for jobs of similar skill, effort, responsibility and working
conditions by using a system that consistently and accurately assesses differences in
relative value among jobs and
 To establish a framework of procedures to determine the grade levels and the
consequent salary range for new jobs or jobs which have evolved and changed.
 To identify a ladder of progression for future movement to all employees interested in
improving their compensation.
 To comply with equal pay legislation and regulations determining pay differences
according to job content.
 To develop a base for merit or pay-for-performance.

Purpose of Job Analysis: Job Analysis plays an important role in recruitment and selection,
job evaluation, job designing, deciding compensation and benefits packages, performance
appraisal, analyzing training and development needs, assessing the worth of a job and
increasing personnel as well as organizational productivity.

Advantages and Dis-Advantages of Job Evaluation:

Job evaluation is a process of determining the relative worth of a job. It is a process which is
helpful even for framing compensation plans by the personnel manager. Job evaluation as a
process is advantageous as well as disadvantages to a company in many ways:
Advantages:

 Provides First Hand Job-Related Information

 Helps in Creating Right Job-Employee Fit
 Helps in Establishing Effective Hiring Practices
 Guides through Performance Evaluation and Appraisal Processes
 Helps in Analyzing Training & Development Needs
 The process of job analysis gives answer to following questions:
 Who to impart training
 When to impart training
 What should be the content of training
 What should be the type of training: behavioral or technical
 Who will conduct training
 Helps in Deciding Compensation Package for a Specific Job: A genuine and unbiased
process of job analysis helps managers in determining the appropriate compensation
package and benefits and allowances for a particular job. This is done on the basis of
responsibilities and hazards involved in a job.
Disadvantages:
 Time Consuming
 Involves Personal Biasness
 Source of Data is Extremely Small
 Involves Lots of Human Efforts
 Job Analyst May Not Possess Appropriate Skills
 Mental Abilities Cannot be Directly Observed

Methods of Job Evaluation:

Analytical methods:
 Factor-Comparison Method: Under this method, the job is evaluated, and the ranks
are given on the basis of a series of factors Viz. Mental effort, physical effort, skills
required supervisory responsibilities, working conditions, and other relevant factors.
These factors are assumed to be constant for each set of jobs. Thus, each job is
compared against each other on this basis and is ranked accordingly. The advantage of
this method is that it is consistent and less subjective, thus appreciable by all. But
however it is the most complex and an expensive method.
  Point-Ranking Method: Under this method, each job’s key factor is identified and
then the sub factors are determined. These sub-factors are then assigned the points by
its importance. For example, the key factor to perform a job is skills, and then it can
be further classified into sub-factors such as training required, communication skills,
social skills, persuasion skills, etc. The point ranking method is less subjective and is
an error free as the rater sees the job from all the perspectives. But however it is a
complex method and is time-consuming since the points and wage scale has to be
decided for each factor and the sub factors.
Non- Analytical methods:
 Ranking Method: This is the simplest and an inexpensive job evaluation method,
wherein the jobs are ranked from he highest to the lowest on the basis of their
importance in the organization. In this method, the overall job is compared with the
other set of jobs and then is given a rank on the basis of its content and complexity in
performing it. Here the job is not broken into the factors, an overall analysis of the job
is done. The main advantage of the ranking method is, it is very easy to understand
and is least expensive. But however it is not free from the limitations, it is subjective
in nature due to which employees may feel offended, and also, it may not be fruitful
in the case of big organizations.
 Job Grading Method: Also known as Job-Classification Method: Under this method
the job grades or classes are predetermined and then each job is assigned to these and
is evaluated accordingly. For Example Class, I, comprise of the managerial level
people under which sub-classification is done on the basis of the job roles such as
office manager, department managers, departmental supervisor, etc. The advantage of
this method is that it is less subjective as compared to the raking method and is
acceptable to the employees. And also, the entire job is compared against the other
jobs and is not broken into factors. The major limitation of this method is that the jobs
may differ with respect to their content and the complexity and by placing all under
one category the results may be overestimated or underestimated.
Wage:
A wage is monetary compensation paid by an employer to an employee in exchange
for work done. Payment may be calculated as a fixed amount for each task completed
or at an hourly or daily rate, or based on an easily measured quantity of work done.

Types of wages: Time wage & Piece wage System

  Time Wage: Time Rate System is otherwise called as Time Work, Day Work, Day
Wages and Day Rate. It is the oldest method of remuneration. The time rate system
is that system of wage payment in which the workers are paid on the basis of time
spent by them in the factory. Under this system, the workers and employees are
paid wages on the basis of the time they have worked rather than the volume of
output they have produced. The wage rate is fixed on hourly, daily weekly,
fortnightly or monthly on the basis of the nature of work.
 Time Rate System Formula: This time rate system calculation is based on the
working hours of the employee that is the amount of time spent on the work along
with the amount of work delivered within the specific period of time. And the
actual formula that helps to calculate the total amount by using this time rate
system formula is
Formula: Wages= Total hours worked X Wages rate per hour.
Examples of Time Rate System
An employee works for Rs. 20 an hour and he spends a total of around 400 hrs.’ in
a month of 30 days at work. What would be his salary?
Calculation under time rate system.
Total hours worked = 400 Hrs, wage per hour = 20
Wages= Total hours worked X Wages rate per hour.
Wages = 400*20 = 8000.Therefore, the employee receives a salary of 8000/- on a
monthly basis.
Features of Time Wage:
 Very popular and easy form of payment.
 Helpful in the payroll function
 All the calculations are quite simple
 There will be no irregularity or uncertainty regarding income or wages
 Can concentrate more on the work as the income will be regular
Importance of Time Wage:
 The worth of the employee can be assessed
 Quality work is given more importance when compared to quantity work.
 High level of monitoring of work can be achieved
 Delays and risks of accidents are high and are out of control.
 No single employee will have control over the whole output.
Advantages of the Time Rate System

 Simple formulation:
 Easy access:
 Production quality:
 Fixed wage:
 Improves equality among employees:
Disadvantages of Time Rate Systems:
 It ignores efficiency
 Loss of skilled workers
 Inefficiency
 Conflicts of thinking
 Cost of production
Piece Wage System: The piece rate system is that system of wage payment in which the
workers are paid on the basis of the units of output produced. Piece rate system does not
consider the time spent by the workers. Piece rate system is the method of remunerating the
workers according to the number of unit produced or job completed. It is also known as
payment by result or output. Piece rate system pays wages at a fixed piece rate for each unit
of output produced. The total wages earned by a worker is calculated by using the following
formula.
Total Wages Earned = Total units of outputs produced x Wage rate per unit of output.
(Or)
Total Wages Earned = Output x Piece Rate
Piece-rate pay is also sometimes referred to as Payment by Results System.
Types of Piece Rate Pay System:
There are mainly 2 types of piece-rate system. They are
 Straight piece rate system
 Differential piece rate system
1. Straight piece rate system: This is the type of wage system where the wages are paid to
the workers based on the output or result of work done.
2. Differential piece rate system: This is a type of wage system where the wages are paid
to the workers after the completion of work. High piece rate is offered to workers who
completed the work within the given time and low piece rate for those who exceeded the
given time for the task.
Advantages & Disadvantage:
• Increases the efficiency of all the employees
• They do not constantly require any kind of micromanagement
• It is very easy to calculate the dues of the worker
• Workers do not end up wasting any time
• The number of products produced is much higher
Disadvantage
• Workers pay much more attention to quantity and not quality
• Planning for the future becomes rather tough
• Finding and fixing on a reasonable piece cost is a rather tough task
• It puts immense pressure on all the employees
• Sometimes even more supervision is required.
Components of Salary Structure:
 Basic Salary: Basic salary of an employee is their base income. It is a fixed
component of an employee’s payroll package. Basic salary of an employee varies
according to his/her designation and industry the company falls in.
 Gross salary: Gross salary refers to the sum of an employee’s basic salary and
various allowances, calculated before tax and other deductions. It includes bonuses,
over-time, and other allowances.
 Take-Home Salary: Take-home salary is calculated by deducting tax deductions at
source (TDS) and other such deductions in accordance to the company policies.
Net Salary = Gross Salary - Professional Tax - Income Tax - Employer's Provident
Fund.
 Allowances: Allowance is the sum received by employees for meeting a job
requirement. Allowances are additional financial benefits included with the basic
salary and differ from one company to another. A few standard types of allowances
covered under the latest salary components is India are:
• House Rent Allowance (HRA)
• Travel Allowance: LTA is the sum paid by the organization to compensate for
domestic travel expenses of employees.
• Conveyance Allowance: This is given to employees to compensate for their
regular commutation expenses to the workplace.
• Dearness Allowance: DA is paid to employees to subdue the effects of
economic inflation.
 • Reimbursements: Sometimes, employees are provided various types of
reimbursements such as phone bills, medical treatments, office stationery and
newspaper bills, etc. The amount is not included in the pay, but compensated
after bills, of specific acceptable instances is provided by an employee.
• Gratuity: Gratuity is the amount that an employee receives as appreciation for the
cumulative service offered to him/her upon leaving the job. Although gratuity is only
paid after an individual completes 5 years or more in an organization and decides to
leave it is deducted every year.
• Insurance: Many organizations provide health, and life insurance plans to the
employees. Its premium is borne by the employer and is a part of CTC.
• Income Tax: The tax imposed on a professional’s income is known income tax.
Generally, employees get their salary after income tax has been deducted by the
organization. This is called Tax Deduction at Source (TDS). The deducted tax is paid
to the government.
• Professional tax: Professional tax is levied by state governments to let a professional
practice a his/her profession. The maximum amount payable per year is ₹2,500. It
depends on the employee’s monthly pay and the state in which they work in.
Sample Salary Slip
What is compensation survey: The main aim of any survey is to arrive at a conclusion by
inferring the survey results. The main aim of compensation survey is to determine the
compensation level for a job role or skill level offered by companies in the same industry or
similar industries.
Why do we conduct compensation survey: We will conduct compensation survey to
understand the external market value of a job and adjust our compensation structure
according to market value. This is important in the sense that we should not lose our
employees to our competitors. So, in order to retain the employees, we need to pay on par
with the market.
Objectives:

• To gather information regarding the industry standards

• To know more about the market rate i.e. compensation offered by the competitors

• To design a fair compensation system

• To design and implement most competitive reward strategies

• To benchmark the compensation strategies

Types of compensation survey:

• Standard Surveys: Standard surveys are undertaken by organizations on a regular
basis. These surveys are conducted annually based on the organizational objectives.
The organizations willing to formulate their compensations strategies based on the
surveys purchase the reports from the research organization.
• Custom Surveys: At times, a few organizations need to know some specific
information. The surveys which cater their need are known as custom surveys. The
organizations either higher research organizations to conduct these surveys for them
or they themselves conduct the survey by sampling few of the competitors on their
own.
Dimensions of a salary survey:
• The job. Salary surveys use jobs as the comparison standard. It is important to ensure
that your job and the salary survey are the same or highly similar. For this purpose the
salary survey must have a job description or at least a job brief for comparison
purposes. Even the job title can be made more specific. Clicking on the job title brings
up a page with all the job titles including several different types of accountants.
 • Cash compensation. What is included in the compensation reported? In this case
there is a choice among base salary, incentive pay or total cash compensation, which
is the sum of base pay and incentive pay.
• Pay Period. While most salary surveys report annual salary some use shorter time
periods, such as monthly. Many surveys report trade and non-exempt (e.g. eligible for
overtime) level jobs using an hourly rate.
• Experience. These rows show the difference in pay rates depending upon the
experience of the worker. This is an important variable if your organization has many
new employees or long tenured employees.
• Labor Market Determination. The location, size and industry all have an impact on
the labor market rates.
• Planning Date. It is important that all data is synchronized to the date the
organization is using to make salary decisions.
• Salary Trend. This is the percentage by which pay is expected to change during the
year being considered.
Compensation Survey Focused on:
• Base salaries, Increase percentages/amounts, Merit increases, Salary ranges, Starting
salaries, Incentives/bonuses, Allowances and benefits, Working hours
Five step process to do compensation survey:
• Sample size: First of all we need to determine sample size of our survey. Sample size
means how many data points(companies) we will get to conduct a survey
• Orientation: Before conducting survey, we need to decide upon on what aspects we
shall conduct a survey.
• Primary Data Collection: We have decided upon sample size and orientation of the
survey. Now the focus turns into data collection. What kind of data we should collect?
We will collect the data relating to the skills, activities, experience, role of the
employees which are similar to our organization in the targeted position.
• How do we collect primary data: Telephone, email, social media networks
and collect the details about their compensation like salary range, other
benefits, perks etc.
• Normalization means trimming the data by eliminating extreme levels of
compensations for non-prioritized attributes. This is important because the extreme
levels of compensation may either pull or push the average level of salary with their
extremities.
 • Setting the Salary Benchmarking: After normalization, we will identify the market
median (midpoint when arranged the data in ascending or descending order) for the
trimmed data. We need to fix this by considering all the attributes that we select for
collecting the data.
Benefits of compensation survey:
• Aid in salary benchmarking:
• Help employers design a total rewards compensation package.
• Ensure employers keep up with salary trends.
• Make sure organizations recruit and retain the best employees.
• Create a culture of consistency and transparency.
Challenges of compensation survey:
• Time and money into creating one.
• Employer concerns including confidentiality.
• Participant concern including confidentiality.
• The use of bad market salary data.
• Risks of turnover.
What is HAY..?

• The Hay Job Grading Scheme was developed in the early 1950s by E. N. Hay and
Associates. It is a scheme which is based on the "points factor" approach. This is a
common approach to job grading. It is the most common job evaluation system in all
areas of i.e., private, public, Profit and non-profit.
• The system works on an integration of all the factors. A job is evaluated by looking at
the knowledge required to do the job (whether practical or intellectual), the kind of
thinking required to solve the problems which the job commonly faces, the
responsibilities (accountabilities) assigned, and the work environment in which the
work is performed.
Factors:
• Know how
• Problem solving
• Accountability
• Working conditions
‘Know How’ is defined as the "sum total of every kind of knowledge and skill, however,
acquired, needed for acceptable job performance.
 There are three dimensions in know how:

 Practical procedures, specialized techniques and knowledge within occupational

fields, commercial functions, and professional and scientific disciplines.
 Planning, organizing, coordinating, integrating, staffing, directing and or controlling
the activities and resources associated with the function of the unit, position, section,
etc.
 Face to face skills needed for various relationships with other people.

Problem Solving: ‘Problem Solving’ is "the amount and nature of the thinking required
in the job in the form of analyzing, reasoning, evaluating, creating, using judgment,
forming hypotheses, drawing inferences, arriving at conclusions, etc."
There are two dimensions in problem solving:
• The environment in which the thinking takes place.
• The challenge of the thinking to be done; the novelty and complexity of the
thinking required.
Accountability: ‘Accountability’ is "the answerability for action and its consequences.
The measured effect of the job on end results in the organization."
There are three dimensions in accountability:
• "Freedom to Act" which is the extent of personal, procedural or systematic guidance
and control on the job.
• "Job Impact on End Results" which is the degree to which the job affects or brings
about the results expected of the unit or function being considered.
• "Magnitude" is the size of the function or unit measured in the most appropriate
fashion.
Working conditions: Working Conditions’ assess the environment in which the job is
performed. Working Conditions are made up of four dimensions:
• "Physical Effort" - jobs, which may require levels of physical activity, which may
produce physical, stress or fatigue.
• "Physical Environment" - jobs which may include exposure to unavoidable physical
and environmental factors which increase the risk of accident, ill health or discomfort
to the employee.
• "Sensory Attention" - jobs which may require concentrated levels of sensory
attention (i.e. seeing, hearing, smelling, tasting, touching) during the work process.
• "Mental Stress" - refers to exposure to factors inherent in the work process or
environment, which increase the risk of such things as tension or anxiety.
Competitive Compensation Programs: Compensation programs are primarily used to
promote efficiency and productivity of the workforce, but organizations can also use them
to enhance employee recruitment, engagement, retention and employer branding.
Compensation programs stem from the theory that rewards drive behavior. Applied to the
corporate setting, compensation programs enable organizations to produce targeted results
by rewarding employees who are responsible for those results.
The Role of HR: The design of compensation programs has long been a key HR
function. The design of compensation program is simply an extension of that
responsibility. At the most basic level, HR professionals should be prepared to explain to
managers at every level the benefits, drawbacks and costs associated with launching the
programs. Any HR professional or team involved in the design and implementation of an
compensation pay plan should be prepared to do the following:
• Survey employees regarding the incentives they would value.
• Check with employees regularly to measure their satisfaction with the plan.
• Interview employees who are leaving the organization voluntarily to find out if
the pay program had anything to do with their decision to leave.
How compensation & benefits can motivate employees: A competitive salary is only
part of how you motivate a candidate to apply for a job at your company or to retain a
current employee.
• Attract top talent
• Boost employee loyalty
• Increased productivity and profitability:
• Designing Compensation Programs
A criterion for eligibility includes the following:

• Job category (such as production or sales).

• Length of service.
• Job classification (such as executive or administrative).
• The goal of the incentive.
• What the payout will consist of (such as bonuses, stock or cash).
 If your company is moving toward a competitive pay practice, the following steps
can help get you there:
• Get to know your market
• Benchmark salaries
• Develop a compensation plan
• Find pay inequities
• Communicate your strategy
Programs:
• Annual incentive plan: A pay plan that rewards the accomplishment of specific
results. Rewards usually are tied to expected results identified at the beginning of
the performance cycle.
• Discretionary bonus plan: A plan in which management determines the size of
the bonus pool and the amounts to be allocated to individuals after a performance
period. This plan has no predetermined formula or promises and is not
guaranteed.
• Spot awards: Recognize special contributions as they occur for a project or task,
generally accomplished in a short period.
• Profit-sharing plan: A plan through which employees share in the organization's
profits. The plan normally includes a predetermined, defined formula for
allocating profit shares among employees.
• Team/small-group incentives: Any incentive program that focuses on the
performance of a small group, usually a work team. These programs often are
used when measurable output is the result of group effort and it is difficult to
separate individual contributions.
• Retention bonus: A payment or reward outside of regular salary that is offered
as an incentive to keep a key person on the job during a particularly crucial
business cycle.
• Project bonus: A form of additional compensation paid to an employee or a
department for successfully completing a project within a certain time frame.
Competitive Compensation – Benefits:
• Salary
• Insurance
• Paid time off
• Retirement savings plan: 401(k) plans.
• Developing Salary Structures: Many organizations ask their human resource
professionals to create a base pay structure from scratch or to revise the existing structure
to meet their changing needs. For HR professionals whose areas of expertise lie outside
the compensation arena, such a project can seem challenging at best. The compensation
system development process, however, does not have to be an overwhelming and dreaded
goal. Building a market-based pay structure from scratch encompasses the following
steps:
• Gathering the background information needed for project success.
• Determining the sources of external market data and getting the data ready.
• Conducting the market data analysis.
• Developing the pay structures.
• Calculating the costs of the pay structures.
• Implementing and evaluating the new pay structures.
Establish value for each position in your company: The first thing you should do is figure
out the value of each position in the organization. Take a look at market pricing – what other
companies are paying for similar jobs.
Consider your company’s competitive posture: The competitive posture of a company is
its overall salary level compared to market average (i.e., median) across the benchmark jobs.
Are the salary rates for your employees currently above, below or comparable to the rates of
your competitors? You should decide what competitive posture is in the best interest of your
company.
Compensable leverage for your company: Compensable leverage refers to how much more
or less salary rate increases in your company, overall, compared to the market rate increase
for higher-paid positions in the organizational hierarchy.
• Look at external inequalities: This means determining whether there are some
employees with salary rates that are disproportionate, more or less, and inconsistent
with your company’s overall relationship to the market across all jobs.
• Develop a salary structure for your organization: Using the information you’ve
gained from doing the market analysis of salary rates, you can now develop the salary
structure for your company.
• Get your current employees up to par: Now that you have established a salary
structure, possibly with pay grades, then you’ll want to look at your current employees’
salary rates compared to the range to see if anyone is being paid below the minimum
rate or above the maximum rate. This involves determining whether the salary rates of
 any employees should be adjusted to achieve market alignment (i.e., your desired
competitive posture) as created through the structure.
Job Analysis: In simple words Job analysis is a formal programme which examines the
tasks, duties and responsibilities contained in an individual unit of work. Job analysis
contains a simple term called "analysis", which means detailed study or examination of
something (job) in order to understand more about it (job). Therefore job analysis is to
understand more about a specific job in order to optimize it. Job analysis is a systematic
process of collecting complete information pertaining to a job. Morris Viteles. In 1922, he
used job analysis in order to select employees for a trolley car company.
Definition:
• In the words of Edwin B. Flippo, "Job analysis is the process of studying and
collecting information relating to the operations and responsibilities of a specific job”
• In the words of Dale Yoder. "A Job is a collection of duties, tasks and responsibilities
which are assigned to an individual and which is different from other assignment”
Intention behind job analysis is to answer questions such as:
• What is the need of the job to exist?
• What physical & mental activities undertake?
• When is the job to be performed?
• Where is the job to be performed?
• How does the job performed by an employee?
• What qualities and qualifications are required to perform the job?
Objectives:
• To secure and maintain complete, accurate and impersonal descriptions of each
diverse job in the entire plant.
• To provide a standard procedure for determining the relative worth or value of each
job in a plant.
• To determine a rate of pay for each job this is fair and equitable with relation to other
jobs in the plant, community and industry.
• To ensure that like wages are paid to all qualified employees on like work.
• To provide a factual basis for the consideration of wage rates for similar jobs both
within the community and within the industry.
What aspects Job Are Analyzed?
• Duties and Tasks:
• Environment:
 • Tools & Equipment
• Relationships
• Requirements
Job analysis takes place before the recruitment process:

Job analysis

Approaches to job analysis: Job analysis is done by using two approaches:

• Task oriented approach: Task oriented approach to job analysis focus on the
actual activities involved in a job. It mainly considers duties and responsibilities
of a job. HR managers develop task statements that state the functions of a job in
great detail.
 • Worker oriented approach: Examining human attributes of a job is another
approach of job analysis. These attributes are classified as knowledge, skills,
abilities, and other characteristics, collectively known as KSAO.
 Knowledge refers to the information required by an employee to perform the job.
 Skills are the proficiencies needed for good performance.
 Abilities refer to the attributes of employees that are stable over time.
 Other attributes such as personality factors are other characteristics.
Purpose of job analysis:
• Training needs assessment: Job analysis is used to determine training needs such as
training content, assessment tests, test equipment and methods of training. It is also
useful in identifying the areas where an employee needs training.
• Compensation management: Compensation management/salary administration is
one of the core HR functions. Job analysis can be used in determining skill levels,
compensable job factors, required level of education, etc. It is important in deciding
pay packages and job benefits of employees.
• Recruitment and selection procedures: Job analysis helps in hiring the right person
for a job. It helps in identifying the job duties that should be included in vacancy
announcements. It also helps in collecting information on educational qualifications,
minimum requirements, and appropriate salary level.
• Performance review: Every organization has goals and objectives to achieve and
certain performance standards to be maintained by its employees. Job analysis helps
in identifying the goals and objectives, performance standards and evaluation criteria
and duties to be evaluated.
Process of job analysis:
• Organizational analysis: The first step in the job analysis process is to determine its
purpose. This will help determine what kind of data to collect and how to collect it.
The necessary background information for this step can be collected by using
organization charts, process charts and job descriptions.
• Select representative positions: It will be time consuming and costly to analyses all
jobs in an organization. So, it is essential to select a representative sample of jobs for
detail job analysis.
 • Collect data: The next step is to collect job-related data such as educational
qualification, duties, and responsibilities, working conditions, employee behavior,
skills and abilities.
• Review collected data: A job analysis report is prepared by using the gathered data.
The information is then verified with the worker performing the job and their
supervisor.
• Developing job description: Job description is a document that describes the
responsibilities, working conditions, locations, risks and tasks required for effective
job performance.
• Developing job description: Job description is a document that describes the
responsibilities, working conditions, locations, risks and tasks required for effective
job performance.
• Developing job specification: The final step in the process is to develop job
specification. Job specification and job descriptions are two tangible products of the
job analysis process. Job specification is a statement of personal traits, educational
qualification, experience, background and skills needed to perform a job.
Methods of Job Analysis:
• Observation Method: Three methods of Job Analysis are based on observation. These are-
Direct Observation; Work Method Analysis, including time and motion studies and micro-
motion analysis; and critical incident method.
• Interview Method: It involves discussions between job analysis and job occupants or
experts. Job analysis data from individual and group interviews with employees are often
supplemented by information from supervisors of employees whose jobs are to be analyzed.
• Questionnaire Method: These can be filled out by the employees on an individual
basis or by job analysts for a group of employees.
Benefits of a job analysis:
• Obtaining solid first-hand job-related data on the particular duties associated to job.
• Identification of risks associated with the job responsibilities.
• Identification of the skills and abilities required for an employee to perform the job.
• Identification of critical competencies required for success.
• More specific and accurate job descriptions
• More accurate job postings
• Ability to offer evidence based and accurate pre-hire employee assessments.
Cost to Company (CTC): Cost to Company (CTC) is the yearly expenditure that a company
spends on an employee. Each employee spend depends on their salary and variable. CTC is
calculated by adding salary and additional benefits that an employee receives such as EPF,
gratuity, house allowance, food coupons, medical insurance, travel expense and so on. CTC
in colloquial terms is the cost an employer bears to hire and sustain its employees.
Formula: CTC = Gross Salary + Benefits.
If an employee's salary is ₹50,000 and the company pays an additional ₹10,000 for their
health insurance, the CTC is ₹60,000. Employees may not directly receive the CTC
amount as cash.
How is Cost to Company (CTC) calculated in salary?
CTC = Direct Benefits + Indirect Benefits + Savings Contributions
• Direct Benefits: This refers to the employee's take-home or net salary or the amount
paid to the employee monthly by the employer and is subject to government taxes.
• Indirect Benefits: These refer to the benefits that employees enjoy without paying for
them. While the company pays them on behalf of the employee they are added to the
employee’s CTC since it is an expense from the company’s point of view.
• Savings Contribution: This refers to the monetary value added to the employee’s
CTC, for Eg: EPF.
Why measure Human Resource costs?
• Monitor departmental costs: Monitoring costs is not specific to the HR department.
In this day and age, every department and manager need to know their costs. For
example, this can be required for budgeting purposes.
• Measure impact and overall success: If HR costs increase while HR effectiveness
decreases, we have a problem. This means that HR efficiency goes down. Efficiency
is the number of resources required to achieve a certain goal. If many resources are
used to reach this goal, efficiency is low. If only few resources are used, efficiency is
high.
• Predict future costs: This is quite straightforward: if the same number of people do
the same things next year as they did last year, the costs are expected to be equal.
• Calculate a return of investment (ROI): Calculating an ROI is the final reason why
HR professionals are interested in estimating Human Resource costs. Cost is a key
element in the ROI.
CTC Calculation: