Job evaluation in HRM

Delve into the essentials of job evaluation in HRM, offering insights into its importance for pay equity and the top methods used. Understand how this systematic process helps determine fair compensation and supports equal, uniform pay structures.

By Brad Nakase, Attorney

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What does job evaluation involve?

Job evaluation is a difficult but necessary task for achieving pay equality. This article will walk you through the entire process, define the term, and discuss the four main job evaluation techniques. Now, let’s get started!

Defining job evaluation 

Job evaluation is the methodical process of establishing the relative worth of various positions within a company. Job evaluation compares jobs to establish an equal, fair, and uniform pay scale for all. This guarantees that each person receives fair compensation and that various job entry and performance standards vary.

HR develops job evaluations, frequently in collaboration with labor unions, other social partners, and for-profit consulting firms.

One benefit of job evaluation is that it ignores the employee’s personal attributes. A European Commission report on the subject states that a job’s relative value is evaluated regardless of the individual employee’s attributes.

The relative worth is correlated with a ranking associated with basic pay scales or brackets (referred to as wage grids). A job holder’s personal attributes (such as seniority, education, and tenure) are recognized with the possibility of advancement within the relevant pay scale.

Job evaluation needs to include some fundamental job analysis to give accurate information on the employment in question. Frequently, the job analysis and subsequent job description serve as the foundation. This is the basis for evaluating the job. The job’s added value to the organization is one of the evaluation’s primary criteria. Based on this judgment, the position is added to the work hierarchy. The ensuing framework guarantees transparency and pay parity for minorities and women.

The European Commission is in favor of job evaluation. According to Cordis, the agency that coordinates EU-funded R&D activities, 49% of European private sector businesses use a formal job evaluation method, with SMEs using less than 3%. The absence of assessment results in irregular wage payment procedures and inadequate career and skill advancement opportunities for staff members.

Methods for Job Evaluation

The appraisal of a job can be done in a variety of ways. Differentiating between quantitative and qualitative techniques is the simplest way to divide these.

Every one of these approaches has benefits and drawbacks of its own. While quantitative approaches are more objective and consider necessary abilities and responsibilities, qualitative ones are typically faster. A combination of techniques is always the best course of action. Each of the techniques will be briefly explained.

  • Paired comparison/ranking method: Jobs are paired, and the most significant job is selected for each pair. As a result, many jobs are required to be ranked according to seniority. This strategy is only advised for smaller businesses with fewer than 100 employees.
  • Category of work: Jobs are ranked based on a preset grade comparison. Director, manager, operator, CEO, and vice president are a few examples of classifications. Many US-based organizations employ this predetermined rating. Within job families, grades are established (e.g., sales, HR, marketing).
  • Method of factor comparison: Several characteristics are used to rate jobs. The most used factors include knowledge and skills, communication and contacts, decision-making, influence, people management, freedom of action, working environment, and financial resource responsibility. Points are allocated to each factor, and the sum of the points determines the job’s ranking.
  • Point-factor method: Jobs are evaluated based on the necessary skills, problem-solving aptitude, and responsibility. Points are allocated to each factor, and the sum of all the points determines the job’s ranking.
  • Current market rates: Pay rates are evaluated based on market rates for similar jobs, allowing the job to be valued at its true worth. This ignores internal equity and the possibility that a job’s internal value may be less than its market value. Market pricing may undermine the goal of job evaluation, maintaining existing disparities in the market.

Different approaches are selected based on the complexity and scale of the organization. The paired comparison approach (as shown below) is effective for smaller companies. For larger organizations, a factor comparison or point-factor method is preferable.

Point-factor approach

Perhaps the most well-known approach for evaluating jobs is the point-factor method. The following are the general steps for this approach:

  • Jobs are posted.
  • Evaluation criteria have been established.
  • Grading systems based on these variables are established.
  • Points are awarded for each factor per job.
  • There is a set salary structure.
  • Adjustment of the current wage structure.

As a result, each position has a wage range and a distribution of points. Any anomalies should be handled individually and can be calculated.

The four-step job evaluation process

There are four steps in the job evaluation process. These are as follows: Diagnosis and planning, development and design, modeling and validation, and communication and launch.

Phase 1: Diagnosis and planning

A first workshop is held to kick off the job evaluation program at this phase. The evaluation’s scope and evaluation methods are chosen during this workshop.

In terms of scale, choices must be made about funding, timeliness, level of rigor, administration, equipment and software, the amount of outside assistance needed, building on prior projects, and how job assessment will be utilized to support equitable pay.

The company must also choose its system for employee evaluations. There are several systems with varying levels of personalization:

  • Proprietary: This framework was developed by consultants and is now in use. It takes little internal work, is simple to implement, and has been tried and tested. The drawback is that it could not work for every company, making them reliant on the supplier.
  • Customized: This expands and extends an existing framework, such as an existing (outdated) employment structure. This offers a solid foundation, facilitates quicker implementation, and fosters staff buy-in. The framework’s major drawback is that it must be thoroughly altered because it might not otherwise work for the company.
  • Tailor-made: This is an entirely personalized plan created internally with outside consultants’ assistance. The participatory process results in excellent alignment with the company, which also fosters buy-in and harmony with a framework of competencies. However, the process will take more time and be more expensive, which is a disadvantage.

The next steps involve identifying benchmark jobs, organizing data gathering, and developing a communication strategy.

Phase Two: Development and Design

The elements and levels of the job evaluation are decided upon in the following phase. This frequently takes place via a workshop. Finding comparatively timeless characteristics is crucial at this stage. Remember that the job scheme remains relevant as long as the underlying components remain relevant. It could remain relevant for over 25 years due to the expense and work involved in creating a job plan.

After everything is finished, information is gathered about the various jobs within the company.

Phase 3: Modeling and validation

The third stage involves analyzing the data, collecting results, and discussing how the various elements are weighted. This might need some fine-tuning because the initial definitions could skew the results.

Then, jobs are categorized, and a pay grade system is established. A certain percentage of occupations will always fall outside of the pay grade system. One illustration would be the extremely rare but vital specialized positions in machine learning and artificial intelligence that are essential to the company’s future. These could need to be paid according to a separate scale. The danger here is that, in, say, ten years, these positions might become much more common. By then, they might become overcompensated. As a result, this might need to be changed later.

Phase 4: Communication & Launch 

The framework is implemented at the last stage of the employment appraisal procedure. The best action is to inform all parties impacted of potential changes to their pay grade system. Additionally, there must be a way to challenge judgments you think are unfair. Here, it’s critical to pay attention to and review the opinions of the staff.

The company’s support will make this phase easier. Further, cutting employee pay might not be feasible due to national labor rules protecting wages or risking employee attrition.

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