Compensable Factor and its process of identification

A compensable factor is a characteristic in the work that

the organization values which help to pursue its strategy
and achieve objectives. Compensable Factors are used
to define the criteria used to evaluate jobs. Normally,
each factor is assigned a weight of importance which
also relates to the organizations objectives. Depending
on the organizational requirements 5-6 compensable
factors are identified and ranked in a five point scale.
Let us discuss the example of an hypothetical
Organization that has identified six compensable factors.

1.Consequences of Errors - This factor describes the degree to which any

error will affect the profit or customer base of the organization. The weight
of this factor is 9, with all factors having a cumulative score of 100.
The consequences of errors have been deemed important because of the
impact it could have on customer satisfaction and profits. The weight has
been kept low because although important, the company recognizes that
mistakes are inevitable in any organization. The ratings are as follows:
1.Errors are easily fixed without the assistance of another, and nobody is
affected in the long term.
2.Errors cause an inconvenience for other members in the organization but
do not affect profits or customer base in the long term.
3.Errors may affect the profits of the organization.
4.Errors may affect the customer base by decreasing satisfaction or loss of
business.
5.Errors may affect the profits of the organization and the customer base.

2. Communication Skills - This factor describes the degree to which verbal and
written skills will be required to complete daily activities. The weight of this
factor is an 11, with all factors having a cumulative score of 100.
Communication skills have been deemed important because the success of
the organization is dependent upon the employees ability to communicate
with others internal and external to the organization. The ratings are as
follows:

1. Requires no oral communication in a group setting; uses programmes such

as Excel, Word, and PowerPoint but is not responsible for creating the conten
2.Requires minimal oral communication in a group setting; is occasionally
responsible for determining the content of memos, presentations, etc.
3. Requires oral communication with internal groups; constantly is responsible
for writing documents.
4. Requires constant oral and written communication with internal groups,
occasional communication with external groups, and knowledge of
specialized programming language.
5. Requires extensive oral and written communication with internal and
external groups.

3. Education and work experience - This factor describes the degree to which a
minimum level of formal education and prior work experience is required to be
hired and perform work. The weight of this factor is a 14, with all factors
having a cumulative score of 100. Education and work experience have been
deemed important because the company wants to ensure that candidates for
all positions will be capable of accomplishing tasks. This factor has taken
precedence over communication skills because as ones education level
increase, so too will their communication skills. The ratings are as follows:
Requires a High School degree (or equivalent), but no prior experience is
needed.
Requires a Graduate Degree, or 2 years prior work experience.
Requires a Graduate Degree, and 1 year of prior work experience or less.
Requires a Graduate Degree along with at least 1 year of prior work
experience.
Requires a Masters degree along with 1 year prior experience; or a
Graduate Degree with at least 5 years experience.

4. Technical/Technological Skills - This factor describes the degree to which an

employee is responsible for using specialized systems. The weight for this
factor is a 20, with all factors having a cumulative score of 100. Technological
skills have been deemed important because the company operates within a
technological industry, and must continuously advance in order to attract new
customers. The ratings are as follows:
1.The employee does not use specialized systems.
2. The employee is required to use specialized systems.
3. The employee is occasionally required to use technical systems with a
specific programming language.
4. The employee is consistently required to use technical systems with a
specific programming language.
5. The employee is required to use technical systems with a specific
programming language and must communicate or translate the language to
others on a regular basis.

5. Job Complexity and Decision Making - This factor describes the degree to
which an employees tasks require creative thinking and decision making
skills. The weight for this factor is a 22, with all factors having a cumulative
score of 100. Job Complexity and Decision Making Skills have been deemed
important because the company has adopted a hierarchical structure they
want to acknowledge the complexity required in decision making, and
promote creativity to ensure future success of the organization. The ratings
are as follows:

1.Tasks are assigned, and employee is not responsible for decision making.
2. Tasks are assigned, but employee is responsible for determining how to
complete the task.
3. Employee must determine what the task to be completed is, but the method
to accomplish the task have already been developed.
4. Employee must determine what the task to be completed is, and what
methods will be used to accomplish the task.
5. Employee is responsible for determining tasks, creating solutions, and
evaluating the solutions for future use.

6. Supervisory, Training, and Advisory Responsibilities - This factor describes

the degree to which an employee is responsible for the actions of another
employee. The weight for this factor is a 24, with all factors having a
cumulative score of 100. Supervisory, Training, and Advisory Responsibilities
have been deemed the most important compensable factor because this will
ensure that the organization works toward achieving objectives which will
ensure the organizations success. The ratings are as follows:

The employee may be used as an advisory but has no training or supervisory

duties.
The employee may be used periodically for training, often as an advisory,
and has no supervisory duties.
The employee is often responsible for training and as an advisory, but has no
supervisory duties.
The employee is often responsible for training and as an advisory, and has
limited supervisory duties.
The employee is consistently responsible for training and advising, and
has extensive supervisory duties.

All Positions within the company is evaluated according to the aforementioned

Compensable Factors. The total ratings determine the appropriate pay, relative
to all positions within the Organizational Family.
Job Families and Total Ranking Based on Compensable Factors
First group all jobs into separate job families. For example all administrative
jobs can be grouped into `Administrative Job Family and accordingly ranking
of compensable factor can be done for each job family as under:

Administrative Job
Family
Administrative Assistant
Administrative Executive
Manager Administration
General Manager
Administration

Ranking of
Compensable Factor
125
131
164
222

Decide on Individual Job Ranking based on compensable factors. Take the

example of Administrative Executive.

Compensable Degree
Factor
Education and 1
Work
experience

Weight

Total

14

14

Communicatio 3
n Skills
Job complexity 1
and decision
making

11

33

22

22

18

24
20
Total

24
20
131

Consequence
of Errors
Supervisory
Training and
Advisory role

Responsibility 1
Technical Skills 1