Job Evaluation: Your 2024 Guide [+ Free Template]
Is your organization compensating people fairly? A conscious effort to evaluate and adjust your pay structures can help you recruit and retain satisfied, productive employees. Because when paid fairly, 82% of workers experience more engagement and fulfillment from their jobs.
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. Research has shown that companies that achieve pay equity are more likely to attract the right talent, meet financial goals, and effectively practice innovation.
In this article, we will explain what job evaluation is, discuss key methods of job evaluation, take you through the full job evaluation process, and share some job evaluation examples. Let’s dive in!
Contents
What is job evaluation?
Benefits of job evaluation
Job evaluation methods
Job evaluation template to download
Job evaluation process: 4 phases
Job evaluation examples
FAQ
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.
The goal of job evaluation is to compare jobs with each other to create a pay structure that is fair, equitable, and consistent for everyone.
Job evaluation is often used for purposes such as:
- Designing competitive and equitable salary range structures
- Determining pay for newly created positions
- Ensuring fair compensation for related positions.
HR is responsible for job evaluation but may partner with a consulting company that conducts the process. In any case, there must be collaboration with leadership teams and workers’ unions or other partners to confirm the evaluation criteria for each position. For instance, these can be working conditions, required skills, degree of difficulty, and supervision needed.
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.
The European Commission actively encourages the use of job evaluation. According to Cordis, which coordinates EU-supported R&D activities, 49% of European organizations in the private sector use a formal job evaluation scheme, with small and mid-sized businesses at less than 3%. This lack of evaluation leads to unstructured wage payment practices and a lack of requirement-based career and skill development for employees.
Check out our Learning Bite to learn everything you need to know about the Job Evaluation.
Job evaluation vs. job analysis
Job evaluation and job analysis, though closely related, serve distinct purposes within an organization. While job evaluation assesses the relative value of positions within an organization, a job analysis provides the foundational information necessary for the evaluation. Job analysis determines a position’s duties, responsibilities, and environment, as well as which skills, credentials, tools, and equipment are needed to perform the job.
Essentially, job analysis outlines what a job entails and the environment in which it is performed, serving as a critical input for creating accurate job descriptions. These descriptions, in turn, are instrumental for job evaluation, as they offer a comprehensive overview of each role, enabling organizations to accurately assess and compare the value of jobs to the company.
Benefits of job evaluation
While job analysis is a resource-intensive process, it’s worth investing in for the following reasons:
- Ensures fair and equitable compensation: Job evaluation helps establish a compensation system that is fair and equitable, aligning pay with the relative value of each job within the organization.
- Helps create competitive salary structures: By assessing the worth of different roles, organizations can design competitive salary ranges that attract and retain talent.
- Promotes pay transparency: The process contributes to pay transparency, making it clear how salaries are determined and reducing the potential for disputes over pay equity.
- Streamlines payroll budgeting: Job evaluation allows you to take a systematic approach for budgeting salaries and wages, helping to manage payroll costs effectively.
- Aids in compliance with legal standards: It helps organizations comply with legal and regulatory requirements related to pay equity and non-discrimination.
- Supports strategic HR management: Job evaluation aligns with strategic HR goals by ensuring that compensation practices support the organization’s overall objectives and culture.
- Enhances employee satisfaction and morale: Fair and transparent compensation structures improve employee satisfaction, morale, and trust in management.
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:
Qualitative Quantitative Job-to-job comparison Ranking method/ pair comparison ranking Factor comparison method Job to pre-determined grade comparison Job classification Point factor method
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:
Evaluation method Description Ranking method/ Paired comparison This simple qualitative method creates a hierarchy of positions that is decided by leadership. Jobs are paired, and for each pair, the most impactful job is chosen. This results in a forced ranking of different jobs based on their importance and seniority.
This approach is only recommended for smaller organizations with fewer than 100 jobs. Due to how subjective this system is, enhancing it with another method will provide a more thorough evaluation.Job classification Another qualitative method is job classification, where jobs are ranked based on a pre-determined grade comparison and grouped into different grade levels. Classifications are based on criteria such as scope of responsibility, skill level, or seniority. Example classifications include CEO, vice president, director, manager, and coordinator. Grades are created among job families (e.g., Marketing, HR, Sales).
This pre-determined ranking is common in many U.S.-based organizations.Factor comparison method The factor comparison method is quantitative and ranks jobs on a series of compensable factors such as knowledge and skills, communication and contacts, decision-making, impact, people management, freedom to act, working environment, and responsibility for financial resources.
Each factor is assigned points based on its relative worth, and the total number of points indicates the job’s ranking. This method facilitates direct comparisons between jobs.Point factor
methodThis commonly used quantitative method assesses jobs by the merit of their required know-how, problem-solving abilities, and accountability. It involves assigning points to each factor based on predefined criteria. Jobs are evaluated by the extent to which they meet these criteria, and the total number of points indicates the job’s score and ranking within the organization’s hierarchy and pay scale. Market pricing The market pricing method is based on external quantitative data. It assesses pay rates by referring to market rates for comparable jobs. This leads to pricing the job based on what it is worth in the marketplace but not necessarily on its value to the organization.
While this approach can help establish competitive salaries, it may oversimplify the job evaluation process. It does not take internal equity into account, nor the fact that the internal value of a job may differ from its market value. Market pricing can perpetuate marketplace inequalities, defeating the purpose of the job evaluation.Hay job evaluation system Edward N. Hay developed this data-driven approach to job evaluation that is widely implemented throughout North America and Europe. It considers the knowledge, problem-solving skills, and accountabilities necessary for each job, as well as the associated working conditions.
These factors are weighed according to a guide chart and then subdivided into elements that are assigned a numerical value. Each element gets scored and added up to produce an overall score for the job. This score assigns the job its range on the pay scale. The Hay system is very thorough but complex and time-consuming to administer.
Job evaluation methods are selected depending on organizational size and complexity. The paired comparison method (choosing the more impactful job of a pair, as displayed below) works well for smaller organizations, while a factor comparison or a point method of job evaluation works better for larger companies.
Job reference a b c d e f Total score Ranking A – 0 1 0 1 0 2 5= B 2 – 2 2 2 0 8 2 C 1 0 – 1 1 0 3 4 D 2 0 1 – 2 0 5 3 E 1 0 1 0 – 0 2 5= F 2 2 2 2 2 – 10 1
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.
Here is what a sample point factor job evaluation method could look like for an individual role:
Once you’ve collected the data for individual jobs, you can create an overview of all the jobs within your organization or a certain department.
Based on that, you can visualize the spread of points and a salary range per job, similar to the image below. Any outliers can be calculated and need to be dealt with on an individual basis, as we discuss in the next section.
Job evaluation process: 4 phases
Implementing a job evaluation demands significant time and planning. While each method has its own procedures, there are some general phases involved in every job evaluation process. We’re outlining the following four phases to guide you through executing an effective job evaluation:
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.
Job evaluation examples
There are all kinds of scenarios where conducting a job evaluation is a good idea. Here are three job evaluation examples that demonstrate how it can be put into action.
1. Job evaluation for a merger
When Scotland’s regional and specialist police forces merged, Police Scotland/Scottish Police Authority (SPA) became the second-largest law enforcement group in the U.K. Since each agency came in with its own compensation program, a job evaluation was needed to create a fair and consistent pay and grading system for the combined staff.
Police Scotland/SPA hired a consultant to conduct the process with the help of a factor-based job evaluation software program. After a thorough assessment of over 800 staff roles, they were able to create an appropriate pay and grading structure.
2. Job evaluation for recruitment
In this hypothetical example, a mid-sized e-commerce company was struggling to fill entry-level customer service positions that were crucial for its growing business. The hiring managers noted that applicants often desired higher starting pay than was offered.
The HR director used the market pricing job evaluation method to gather external market data and compare its salaries to those of similar-sized organizations. The comparison showed that their starting salary was roughly 15% lower than average. This information incentivized the leadership team to approve an increase in starting pay and expand the salary range for these roles.
3. Job evaluation for an initial pay structure
In another speculative example, a locally owned landscaping business offered a range of services from lawn maintenance to tree removal. The company was expanding and needed to formalize how employees were paid. Despite handling different responsibilities, most were earning the same hourly wage.
The owner devised a basic compensation structure by reviewing the typical duties carried out by various employees and classifying them into the following four titles:
- Specialty team leader
- Team leader
- Specialty landscaper
- Landscaper
These categories were based on the level of responsibility and expertise needed to handle tasks and operate specific equipment. With clarification of what each role contributes, employees were paid appropriately via a justifiable method.
Over to you
Job evaluation is the basis for making informed decisions about distributing pay effectively and achieving equitable compensation for employees. The process requires a significant commitment of time and resources. However, understanding each role and assessing its compensatory value is well worth the effort.
A transparent and coherent pay structure promotes pay satisfaction by showing employees how they are paid for what they do. It can also increase their motivation to be productive and improve their skills to achieve career growth.
If you’d like to learn more about job evaluation, we recommend the Hay Job Evaluation Manual and the book Job Evaluation by Armstrong and colleagues, which we used as one of the resources for this article.
FAQ
Job evaluation is the systematic process of determining the relative value of different jobs by comparing them to each other. The goal of job evaluation is to create a consistent and fair pay structure.
Four common job evaluation methods are the ranking method, job classification, the factor comparison method, and the point-factor method. Other well-known methods include market pricing and Hay job evaluation system.
The job classification method ranks jobs based on a pre-determined grade comparison. Example classifications would be CEO, vice president, director, manager, and operator.
An example of a job evaluation would be when an organization goes through the process of comparing jobs and formalizing pay ranges to address salary disparities among similar positions.
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