The objective of job evaluation methods is to calculate the comparative worth of positions so that a pay scale can be established between the jobs, in an orderly and rational system. The term ‘job evaluation’ is encompassing a number of different processes which all include studying and analyzing the responsibilities associated with a position to determine where it should fall in comparison to other roles.
We constantly decide how much jobs are worth. These decisions can be based on market value or other jobs in the company and done either formally or informally.
Or it might be a more formal way of looking at the situation, such as a job evaluation or “leveling”, as described in this chapter, or a systematic comparison to market rates. It has been claimed by Gupta and Jenkins (1991) that the fundamental idea behind job evaluation is that certain jobs “contribute more to organizational effectiveness and success than others, and are worth more than others”.
Evaluating “worth” has a direct or indirect impact on the position of a job in a hierarchy and, as a result, how much someone is compensated. Individuals' performances also have an impact on their pay, although this isn’t something for job evaluation to consider.
This section covers the various types of analytical and non-analytical formal schemes as well as market pricing and leveling procedures. After that, job and role analysis methods are covered, because they provide the factual basis for all formal evaluations. Finally, computers are discussed as a tool for evaluation.
To set up adequate base pay policies, give the right benefits and perks, and compare jobs with other companies, businesses need to divide roles into categories. By doing this job evaluation, they’re able to identify which positions are underpaid or overcompensated in relation to others.
Job evaluation is an important process within Human Resources Management because it allows businesses to maintain internal equity among employees. By conducting job evaluations and assigning positions to specific pay bands or broad bands, businesses can ensure that all employees within a particular job category are compensated similarly.
This helps to avoid any discontent among employees who may feel that they are not being fairly paid in comparison to their colleagues.
Maintaining internal equity is especially important for businesses with a large number of employees. It can be difficult to manage employee satisfaction and motivation when there is a large pay discrepancy between roles. job evaluation allows businesses to identify these discrepancies and make the necessary changes so that all employees are treated equally.
Job Evaluation Purpose
Job evaluation is a method for determining the relative value or size of jobs in an organization to establish internal relativities. There are three purposes of job evaluation, as defined by Armstrong and Cummins (2008):
- The purpose of this exercise is to generate the data needed to develop and keep an equitable grade and pay structure within the organization. This will be done by assigning values to roles or jobs based on fair, rationale, and consistent judgments (internal relativities).
- By comparing job descriptions and salaries, you’ll be able to compare other organizations' pay levels across similar jobs or roles to ensure that your company’s pay rates are competitive.
- In order to ensure that everyone understands the basis upon which grades are defined, jobs graded and rates of pay determined, we need to be transparent.
The first goal was further explained by The Equal Opportunities Commission in its Good Practice Guide on Job Evaluation Schemes Free of Sex Biasis (2003), which stated: “Non-discriminatory job evaluation should lead to a payment system which is transparent and within which work of equal value receives equal pay regardless of sex.”
In the end, the purpose of job evaluation is to create a system that will assess the value of different jobs within an organization. This system will then be used to help set compensation levels for employees based on the job they perform.
In general, Job Evaluation is important because it:
- Links job roles to the overall strategy of the organization
- Informs other HR processes such as compensation and benefits, talent development, and succession planning
- Ensures that job roles are appropriately valued
- Strengthens Internal Equity & allows external benchmarking of salaries and total cash
Why is Job Evaluation Important
Job evaluation is important because it helps to figure out how much different jobs are worth. This is important for things like setting wages and making sure that people are getting paid what they should be for the work that they do. Job evaluation can also help with things like job descriptions since it can be used to figure out exactly what duties are associated with each job.
There are several other important factors to keep in mind:
- When you evaluate a job, take into account the differences in the actual work, not the person doing it.
- Job analysis is used to determine the ‘content’ of a job, meaning what work consists of, what skills are deployed, and so on.
- Each task is evaluated against pre-determined standards or elements. These might be descriptions of the complete job or its parts.
- Involving individuals who will be subjected to the job evaluation at an early stage helps guarantee that the job analysis is accurate and that people are committed to the scheme.
- The wage and salary scales covering the scope of the jobs being evaluated should be included in a job evaluation.
- All systems, in order to stay useful and not become outdated, need regular examination and improvement. They should also be versatile enough to serve different purposes so that they can be used for new tasks as they arise.
The Importance of Linking Job Evaluation to Other HR Processes
Job Evaluations are closely connected with other HR processes; they usually use outcomes of the process as their inputs. For example, Compensation and Benefits cannot work efficiently without an order in various job descriptions and the value of individual jobs. Without such knowledge, Human Resources cannot build a trustful system of job roles and their respective pay grades.
Here are other examples of how Job Evaluation influences other HR processes:
- Organization Design: A well-designed job evaluation process can help to ensure that job role are aligned with the overall strategy of the organization.
- Compensation and Benefits: Job evaluation is often used to help set compensation levels for employees. By understanding the relative value of different job roles, organizations can ensure that employees are paid fairly for the work they do.
- Talent Development: Job evaluation can be used to identify development needs for employees. By understanding the skills and knowledge required to perform a job, organizations can develop training programs to help employees develop the necessary skills.
- Succession Planning: Job evaluation can help to identify potential successors for key roles within the organization. By understanding the relative value of different job roles, organizations can ensure that succession planning is based on job role requirements.
Types of Job Evaluation Methods
The formal analytical or non-analytical job evaluation technique that is used to achieve these goals can be either formal or informal. In the former situation, a thorough study of the position or role produces a job description or role profile as the basis for the job evaluation. Informal evaluation is based on assumptions about what the position entails but may also refer to an out-of-date existing job description.
Formal job evaluation
Formal approaches employ standardized techniques to assess occupations, which can be analytical or non-analytical. Such methods are concerned with internal relativities and the process of establishing and defining job grades or levels in an organization. Schemes may be used to evaluate all jobs or they may focus on ‘benchmark' jobs that are representative of various professions and levels of work at a company that are utilized as points of reference with other jobs.
There is an alternative approach known as “extreme market pricing.” With this approach, pay structures and individual rates of pay are entirely based on systematically collected and analyzed information on market rates. No job evaluation is used to establish internal relativities. Extreme market pricing should be distinguished from the process of collecting and analyzing market rate data to merely establish external relativities after internal relativities have already been determined through formal job evaluation.
In the 1980s and 1990s, formal job evaluation fell out of favor because it was thought to be inflexible, time-consuming, and irrelevant in a market economy where market pricing dictates internal wage rates and relativities. Job evaluation is still utilized by many people (60% of those responding to the 2007 e-reward job evaluation survey had a written policy) and, in fact, its use is increasing as more pressure is put on organizations to achieve equal pay.
While formal job evaluation may work, it should not be seen as an unyielding system. Instead, it is an approach that can be done in a flexible manner. The process of how job evaluation is used means more than the system when deciding if the results are reliable and valid.
Informal job evaluation
Insecure or poorly planned compensation mechanisms, such as informal approaches that price jobs based on assumptions about internal and external relativities, or simply by reference to going or market rates when recruiting people without any systematic study, may lead to potentially costly mistakes.
However, there are degrees of informality. A semi-formal method might demand some firm evidence to back a market pricing decision, and the use of role profiles to enhance accuracy in the matching process.