Point Factor Method

What is the point factor method?

The point factor method is a commonly used job evaluation technique that assesses the value of different positions within an organization. It involves assigning pre-defined factors relevant to each role, such as skills, responsibilities, effort, and working conditions.

Each factor is then further divided into different levels or degrees of complexity (e.g., “basic computer skills” vs. “advanced computer skills” for the “skills” factor). The different factors are weighted according to their importance to the organization. For example, “experience” might be weighted more than “travel requirements.”

Jobs are evaluated based on the points assigned to each level within a factor. The total points for each job are used to determine its overall worth and placement within the organization’s pay structure.

How does the point factor method work?

The point factor method typically involves the following steps:

1. List of jobs: Identify and list the specific jobs that need to be included in the point factor system. To be more effective, you can choose jobs within the same job family or department or other job types that need a clear hierarchy and compensation structure.
2. Identify key factors: First, conduct a job analysis to determine which factors are relevant to evaluating each job. Common factors include skills (e.g., communication), effort (e.g., mental and physical demands), responsibilities (e.g., supervisory role), and working conditions (e.g., travel requirements).
3. Determine the scoring levels or degrees: For each factor, define the levels representing increasing complexity or responsibility. For example, the “education” factor might have levels like “high school diploma” (10 points), “bachelor’s degree” (20 points), or “advanced degrees” (30 points).
4. Assign a weight to each factor: Not all factors will have equal importance to the role and the organization, so you will need to assign weights. “Supervisory” responsibilities might have a higher weight than “basic office skills.”
5. Evaluate each job: Use the pre-defined factors and their corresponding levels to evaluate each job in the list. The evaluator determines which degree best describes each factor of the position. For example, a job requiring advanced skills might be rated at the highest degree for the skill factor.
6. Calculate total points: Add all the points assigned to each level to get the final score for each job. This score is used to compare the job to others in the organization. 
7. Define or adjust the pay structure: After determining the total point score for each job, you must establish salary ranges that correspond to these points. This process might involve creating a new pay structure to match the point score ranges or adjusting your existing one to better reflect each job’s relative worth (determined by the points).

Advantages and disadvantages of using the point factor method

Here are some benefits and cons to consider when using the point factor method:

Advantages

• Objectivity: By quantifying the value of a job based on various factors, this method minimizes subjectivity and personal bias, promoting fairness in compensation.
• Transparency: The clear criteria and systematic approach make it easier to explain how job values were determined, thus increasing transparency with employees
• Detailed analysis: The method provides a detailed analysis of job roles, which can be beneficial not just for compensation planning but also for identifying training needs, career progression pathways, and recruitment strategies.
• Facilitates pay equity: By providing a structured approach to evaluate the worth of a job based on its duties and responsibilities, the point factor method helps ensure that pay levels are equitable and aligned with the job’s demands.

Disadvantages

• Time-consuming: The process of defining factors, assigning weights, and evaluating each job can be complex and time-consuming. It requires a significant investment of resources and expertise to implement and maintain accurately.
• Subjectivity in weighting and scoring: Despite being a quantifiable method, there’s an inherent subjectivity when it comes to assigning weights to various factors. This can introduce biases and potentially skew the evaluation of a job’s value.
• Rigidity: While designed to be flexible, the method can become rigid over time if not regularly reviewed and updated. This rigidity may make it difficult for organizations to adapt quickly to changes in job roles or market conditions.
• Limited scope: The focus on quantifiable methods may not fully capture other qualities such as creativity, problem-solving, or emotional intelligence, which may be just as critical for certain positions.
• Cost: The detailed nature of the point factor method can make it costly. The initial setup, ongoing maintenance, and the need for trained specialists to perform job evaluations contribute to higher operational costs.

HR tip

Before starting with the point factor method in your organization, involve key stakeholders like managers and subject matter experts. They can help you choose the most relevant factors and their associated weights to ensure they accurately reflect your organization’s needs.

Conducting job evaluation using the point factor method

Here is a step-by-step guide to help you perform job evaluations using the point factor method. For simplification, we have limited the subcategories included in each factor. 

Step 1. Factor identification & degree definition 

Identify critical factors that determine the value of different jobs within the organization. Define degrees for each factor to standardize evaluation:

• Skill: 40% of total value
  • Basic: High school diploma or equivalent, basic office skills (10 point)
  • Intermediate: Some college or specialized training, higher technical skills (20 points)
  • Advanced: University degree or extensive specialized training, high-level skills, and expertise (30 points)
• Responsibility (low, medium, high): 30% of total value
  • Low: Follows basic procedures, has limited decision-making responsibility (10 points)
  • Medium: Works independently, has some decision-making authority (20 points)
  • High: Handles complex projects; makes critical decisions (30 points)
• Effort: 20% of total value
  • Low: Minimal physical or mental exertion involved (10 points)
  • Medium: Concentration needed or some physical effort (20 points)
  • High: Intensive mental focus or significant physical exertion (30 points)
• Working conditions: 10% of total value
  • Standard: Comfortable environment, minimal risks (10 points)
  • Challenging: Some discomfort or occasional risks (20 points)
  • Harsh: Regular exposure to discomfort or hazards (30 points)

Step 2: Assign points and weight to each degree

Assign points based on the job’s requirements and calculate the weighted points for each factor. Example for a Customer Service Representative:

Assign points

• Skill: Intermediate (20 points)
• Responsibility: Medium (20 points)
• Effort: Medium (20 points)
• Working conditions: Standard (10 points)
• Total points (unweighted): 20 + 20 + 20 + 10 = 70 points

Weighted points

• Skill: 20 × 0.40 = 8
• Responsibility: 20 × 0.30 = 6
• Effort: 20 × 0.20 = 4
• Working conditions: 10 × 0.10 = 1

Step 3: Point calculation

Sum the weighted points to determine the job’s overall point value:

• Total weighted points: 8 + 6 + 4 + 1 = 19

Step 4: Job ranking

After you have the total weighted points for each job, you can rank the jobs based on their overall point values. The higher the points, the more ‘worth’ the jobs have within the organization.

Step 5: Review and validate results

Share the job evaluation results with key stakeholders for validation. Make any necessary changes based on feedback.

Step 6: Pay structure implementation

Use the job evaluation results to develop or update a pay structure that aligns with market trends and organizational objectives. Regularly review and update it to ensure it matches market standards.

For a more detailed overview of this process, check out our template on the Point Factor Job Evaluation. 

What is the difference between the point factor method and the factor comparison method?

Both methods use a quantitative approach, but the main difference is how they assign value to jobs.  The point factor method assigns pre-defined points to different levels within each factor. In contrast, the factor comparison method uses pre-selected benchmark jobs (e.g., existing positions in the organization) to rank other positions based on each factor. Here’s an overview of their key differences.

What to keep in mind

Ensure you have a communication plan for explaining the point factor method to employees, especially during salary discussions or negotiations. Use multiple channels, such as digital platforms, information sessions, and internal newsletters. Being transparent about how a role is ranked, and its corresponding salary range can help you build trust and understanding in how compensation is determined in your organization.