Job evaluation is a complex but critical process in achieving pay equity. By comparing the responsibilities of each role within your organization, you will learn how to allocate wages fairly to remedy pay discrepancies. Not only do employees appreciate this, but it’s also good for business.
What is job evaluation?
Job evaluation is the systematic process of using internal and external data to determine the relative value that specific jobs bring to an organization. This ensures that compensation is commensurate with the worth of individual roles and that each has appropriate entry and performance requirements.
Job evaluation determines the relative worth of a job based on the role itself and not the individual skills of the person performing the job. According to a European Commission report on pay transparency, “(t)he determination of the worth of a job is assessed irrespective of the qualities of the specific job holder.”
The relative worth corresponds to a ranking, which then corresponds to pay scales (called wage grids). Based on this evaluation, the job is added to the job structure. The resulting structure ensures pay transparency and equity between various groups of employees.
Personal qualities of the job holder, including seniority, education level, and tenure, are rewarded by an entitlement to higher steps within the applicable pay bracket.
Job evaluation determines the relative worth of a job based on the role itself and not the individual skills of the person performing the job. According to a European Commission report on pay transparency, “(t)he determination of the worth of a job is assessed irrespective of the qualities of the specific job holder.”
The relative worth corresponds to a ranking, which then corresponds to pay scales (called wage grids). Based on this evaluation, the job is added to the job structure. The resulting structure ensures pay transparency and equity between various groups of employees.
Personal qualities of the job holder, including seniority, education level, and tenure, are rewarded by an entitlement to higher steps within the applicable pay bracket.
Job evaluation methods
There are a variety of methods for job evaluation, and all of them involve comparisons derived from either qualitative or quantitative data. Qualitative methods draw comparisons from a subjective review of each position’s characteristics. Quantitative methods assign numerical values to each position and depict the comparison in numbers.
Here is a look at how four common job evaluation methods fall into these two categories:
Each type has its advantages and disadvantages. The qualitative methods are usually faster while the quantitative methods are more objective and account for required skills and responsibilities. The best approach is typically a combination of techniques.
Next to the four above-mentioned methods, market pricing and Hay job evaluation system are also often used to conduct job evaluations.
Following is a brief explanation of six job evaluation methods:
Next to the four above-mentioned methods, market pricing and Hay job evaluation system are also often used to conduct job evaluations.
Following is a brief explanation of six job evaluation methods:
Point factor method in more detail
The point factor method is probably the best-known of all job evaluation methods. On a high level, the steps for this approach are as follows:
- List jobs.
- Define evaluation factors and factor subcategories.
- Determine scoring degrees on these factors.
- Assign a weight to each factor.
- Allocate points per job for each factor.
- Define a new wage structure.
- Adjust the existing wage structure.
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Phase 1: Planning & diagnosis
A job evaluation project starts with an initial workshop to decide on the scope and approach.
In terms of scope, you need to make decisions on the following:
- How job evaluation will be used to support equal pay
- Cost/budget
- Time constraints
- Degree of rigor applied
- Who are all the stakeholders?
- Who will be responsible for administration?
- Data sources, tools, and software
- External help required
- How to build on previous projects
The next decision is which job evaluation method you will use. It’s also important to consider the degree of customization your organization needs for the method. For example:
- Proprietary. This is an existing framework created by consultants. It has been tried and tested, is easy to implement, and requires low internal effort. The con is that it may not suit every organization and creates dependence on the supplier.
- Customized. This builds upon an existing framework. It provides a good starting point, leads to faster implementation, and helps to create employee buy-in. This may require sufficiently revising a framework that is not entirely suited for the organization.
- Tailor-made. This is a fully customized scheme developed in-house with the help of external advisors. The participatory process leads to buy-in and enables alignment with a competency framework. Although it will be a great fit for the organization, the process will take longer and cost more.
Next comes identifying benchmark jobs, planning the data collection, and forming a communication plan for the job evaluation team.
Bear in mind that this phase will require multiple meetings to cover everything. Rushed planning can result in more roadblocks and inefficiencies that slow or stall the process.
Phase 2: Design & development
The second phase involves determining which evaluation elements and levels to incorporate as benchmarks. This often happens through a workshop to discuss how various roles impact the organization.
It is important to identify relatively timeless elements because the job scheme is relevant only for as long as the elements it is based on are relevant.
Once this is complete, it’s time to collect and analyze data on the different roles in the organization, such as:
- Organizational chart or hierarchy with grade classifications
- Current salaries
- Job descriptions
- Workforce demographics
Phase 3: Validation & modeling
The third phase starts with discussing the collected data and the weightings of the different elements. This may require some fine-tuning as initial definitions often skew the results.
Next comes drafting a pay grade structure and categorizing jobs. It is likely that certain jobs will not fit perfectly within the pay grade structure. For example, these can be specialist roles in artificial intelligence and machine learning that are in demand and crucial for the company’s future. These jobs may have to be ranked higher on the salary scale than their titles correlate with. As qualified candidates for these roles become more abundant in the future, their placement on the pay scale may need to be revised.
Phase 4: Communication & roll-out
The final phase of the job evaluation process is where the new pay structure is implemented. It is crucial to explain to everyone affected why their pay grade may have changed.
This phase goes smoother when there is buy-in throughout the organization. There should be an opportunity for employees to appeal decisions they perceive as unfair. Investigating these circumstances will help employees feel heard, ensure transparency, and uncover potential discrepancies in the system that need to be remedied.
As a note of caution, lowering current workers’ salaries is not advisable. This will cause unrest, lower morale, and prompt people to leave the organization. Furthermore, certain wages are protected under labor laws.
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