"There is no success without

hardship." —Socrates
 Lecture outline
 Factors determining pay
 Focal elements of a job evaluation system
 Alternative pay systems
 Job evaluation
 Process of job evaluation
 Objectives
 Different concepts
 Non-Quantitative Approaches
 Quantitative Approaches
 Advantages and disadvantages
 Conclusion
 Questions
 How to design a systematic payment structure, right across the
board?
 How to design a systematic and flexible organization structure
with full-blooded managerial roles.
 Does your organization lack a formal job evaluation method?
 Is your organization using more than one job evaluation system
for different groups of employees?
 Do employees perceive your job evaluation system and pay
practices as unfair?
 Do unions perceive your current system as unfair?
 Are there disparities in pay between the same or similar jobs
within your organization?
 Is your current job evaluation system unresponsive to the
marketplace?
 Is your job evaluation system subjective and discriminatory?
 Is your current job evaluation method difficult to understand?
 Factors determining pay
 Value of job
1. Job worth
 Demand and supply of talent ,
2. Market forces Sectorial /Locational trends

3. Macro Economics  Economic pattern , Growth cycles ,

Locational variations, Cost of living
4. Internal equity index
considerations  Need for compression of pay within
levels
5. Individual merit  Individual performance, Talent
segmentation, critical job holders
6. Legalities
 Statutory requirements
 Why evaluate jobs ?
 Get data into & out of reward surveys
 Consistency
 Create a talent Management framework
 Increase employee perceptions of fairness & equity
 Reduce litigation Risk
 Facilitate communication of reward policies
 Price non – benchmark jobs
 Different concepts
 Job evaluation - Assesses the relative worth of jobs

 Job analysis –complete study of job

 Performance Appraisal - Assesses the performance of individual employees in

the conduct of specific job duties.

 Position Allocation - Determines the appropriate classification for each

position/employee

 Job complexity - It refers to the amount of judgment , initiative, ingenuity &

complex data analysis that doing the job requires.

 Job structure – an ordering of jobs based on the content or relative value.

 Job evaluation

 It is systematic way of determining the value/worth of a

job in relation to other jobs in the organization.

 It is systematic process of analyzing & evaluating jobs

to determine the relative worth of each job in an org &
forms the basis for designing the compensation mgt
system in organization.
 Key aspects of JE
 Tries to asses jobs, not people.

 The standards of JE are relative not absolute

 Raw information of JE is obtained from job analysis exercise.

 Provides a basis for rational wage structure with relativities addresses

linked to job worth.

 Align JE with a competency framework

 It tries to make a systematic comparison between jobs to assess their

relative worth for the purpose of establishing a rational pay structure.
 Process of job evaluation
 Preparation of a Job evaluation Plan
 Creating job Evaluation committee
 (Usually a job evaluation committee consisting of
experienced employees, union representatives and HR
experts)
 Job description & job specification
 Selecting the method of evaluation
 Selection of job dimensions
 Classification of jobs
 Implementation of evaluation
 Maintenance
 Principles
 Job evaluation must attempt to rate the job and not the man.

 (b) Elements of job selected for the job must be common to most of the
jobs, few in number and simple to identify and easy to understand.

 (c) Clean definition of elements and consistency of degrees of such

elements, improve accuracy of job evaluation.

 (d) Secure willing co-operation and support of supervisors on job

evaluation. This is obtained by selling this idea among them and
obtains this participation in the process.

 (e) Secure co-operation and participation from employees.

 (f) Minimize number of wage rate within each grade.

 Objectives
 To systematically establish the relative value of jobs
within an organization.
 Impose a structured approach to determining job
value that is objective (to the extent possible) and
documented
 Determine equitable wage differentials between
different jobs in the organization.
 Provide a basis for pay determination , fixing
incentives & different bonus plans.
 To clarify the responsibility & authority attached with
each job.
 Serves as a reference for resolving individual
grievances concerning wage rates.
 To avoid discrimination of any kind in wage
administration
Equity theory of J .S Adams (1963)

 External Equity

 Internal Equity

 Individual Equity

 Procedural Equity
 Implications for managers
 People measure the totals of their inputs and outcomes. This means a
working mother may accept lower monetary compensation in return
for more flexible working hours.

 Different employees ascribe personal values to inputs and outcomes.

 Employees are able to adjust for purchasing power and local market
conditions.

 Although it may be acceptable for more senior staff to receive higher

compensation, there are limits to the balance of the scales of equity
and employees can find excessive executive pay demotivating.

 Staff perceptions of inputs and outcomes of themselves and others may

be incorrect, and perceptions need to be managed effectively.

 An employee who believes he is overcompensated may increase his

effort.
Time-based method of job
measurement
 Inducting a new subordinate in 4 months.
 Establishing a new marketing outlet in 2 years.
 Completing the installation of a new process in 15
months.
 Working up a contract with a new customer in 6
months.
 Ordering and planning for delivery of a new machine
tool in 9 months.
 Getting the necessary information and preparing a
planning memorandum and recommendation in 15
months.
Time in management as a basis for
measuring the size of a job
 Every concrete task that someone is required to do has a target completion time.

 The higher a person goes in an executive system, the longer is the time
framework within which he or she works.

 A job’s size can be directly and simply measured by completion times targeted
for the longest tasks that are required to be carried out in that role, namely, the
time span of discretion.

 The time span of discretion coincides very closely with people’s judgments
about fair pay for the work involved.

 Whether one job is bigger than another, has a higher level of responsibility or
greater weight of responsibility, can be determined directly by comparing the
maximum time span of discretion in the two jobs—the longest times forward in
which an incumbent must plan and carry out particular tasks.
 Uses
 Determining pay and grading structures
 A fair and equal pay system
 Comparing rates against the external market
 Changes in the job content
 Clarifying career paths and succession planning
 Harmonization of pay and conditions with one pay
spine
 Technological and organizational change
 Establishing Pay Rates
 Conduct a salary survey of what other employees are
paying for comparable jobs.
 Determine the worth of each job in your organization
through job evaluation.
 Group similar jobs into pay grades.
 Price each pay grade by using wave curves.
 Fine tune pay rates
 Salary survey
 Salary.com - provides information on salary by job and
adapts national averages by applying local cost of living
differences
 Am I paid what should I Get?
 Job star job star .org – Profession specific surveys

 Pay check India

 www.paycheck.in
 To determine what equitable pay ranges are for the
following job.
 Non-Quantitative Approaches
 Whole job ranking

 Single Factor Ranking

 Paired comparison

 Relative ranking

 Job classification or Grading

 Market Pricing
 Quantitative Approaches
 Attempt to establish relative worth
 Give the illusion of being more precise than non-
quantitative approaches
 Easier to defend to employees and managers
 Tool should be tailored to job classification philosophy

 Point Factor
 Factor Comparison method
 Scored Questionnaires
 Decision Band
 Job classification or grading
 Jobs placed at different levels , grades which are
clearly defined
 Analyzing the organization structure
 Determining the job dimensions/factors for defining
grades
 Using inputs from employees & TU representatives
regarding the number of grades & grade description
and job classification.
 Freezing the grades & assigning monetary values
 JOB CLASSIFICATION
Following is a brief description of classification in an
office:
 Class 1- Executives: Office manager, deputy office
manager, department supervisor, etc.

 Class 2- Skilled workers: Purchasing assistant, cashier,

receipts clerk, etc.

 Class 3- Semiskilled workers: Stenotypists, machine

operators, switchboard operator, etc.

 Class 4- Semiskilled workers: file clerks, office boys, etc.

 Market Pricing
 Not a formal job evaluation methodology
 Often used by smaller organizations
 Employees and managers tend to support market based
systems
 If administered fairly, will take into consideration both
increases and decreases in market conditions. This is
often not well received by employees and labor
organizations.
 Requires considerable market data. Typically, at least 50%
of all jobs need to be priced to defend values for related
jobs
 Point rating method
 Method introduced by Merrill R. Lott
 Different scales may be required to evaluate different
jobs
 Define the job factors or compensable factors
 Determine the sub-factors – specific to the job being
evaluated
 Define degree statements -specific requirements for
each job
 Assign points to factors ,sub factors & degrees
 Preparation of a chart
 Applying the point system
 Point Factor Plans
1. Skill - experience, training, education and ability
measured in terms of the job’s performance
2. Effort - physical or mental exertion needed for job
performance
3. Responsibility - accountability
4. Working Conditions - surroundings and hazards
encountered
 The system is perceived as valid by its users
 Although the system is dependable & documented
,this method is time taking ,involves high costs & a
lot of clerical work
 Subjective assessment needed to establish point
range for salary grades
 Compensable Factors
Skill Effort
Physical demands
Mental exertion
Knowledge (education/training)
 Experience needed
 Credentials or licenses required
 Manual dexterity required
 Analytical ability required
 Interpersonal communications
Working Conditions
 Hazardous/dangerous environment
 Adverse conditions/Travel
 Hay methodology
 A methodology used by corporates and organizations to map out their job
roles in the context of the organizational structure.

 It provides clarity in result areas and accountabilities in the processes of the

organization
 Enabling salary and benefit grading or benchmarking due to standardization of
job levels
 Improved succession planning or mobility within the organization
 Creation of more useful and focused job descriptions.

 Applying the Hay methodology to a position results in two profiles being

produced which are called long and short profiles. The long profile
provides a view on aspects of the role and a score. The short profile refers
to the nature of the job (e.g. scientist vs. sales manager) and acts as a
check on the long profile.
Mercer International Position
Evaluation
 Compensable factors :
 Impact-- Size of Organization ,Contribution
 Communication
 Innovation
 Knowledge - Teams Breadth (Application of
knowledge)
 Working Conditions- High Risk
Global Grading System
 Functional Knowledge

 Business Expertise

 Problem Solving

 Leadership

 Area of Influence

 Nature of Influence

 Communication / Interpersonal Skills

 The Process includes
 Degrees that define the factor range and its respective intervals,
along with point values, are established. For example, Education
might be divided into the following degrees:
 No formal education required
 Requires reading and writing at the 8th grade level
 Requires High School diploma or equivalent
 Requires a Bachelor’s degree
 Requires a Master’s degree
 Requires a Ph.D. degree
Factor Comparison method
E.J.Benge
A refinement of whole job ranking
No detailed criteria
Based on principles of point rating and ranking
Universal job factors –mental requirements,
physical , skill, responsibilities & working
conditions.
Each factor can be weighted
Jobs are ranked within each factor
Labor intensive - involves numerous judgments
in order to build ranking ( jobs titles X factors =
number of individual decisions needed)
 Steps to be followed
 Define specific factors -- four or seven

 Each job is ranked several times for each compensable factor selected.
 Identify key jobs or benchmark jobs

 Benchmark jobs should be selected as having certain characteristics:

1. equitable pay (not overpaid or underpaid)

2. range of the factors (for each factor, some jobs would be at the low end
of the factor while others would be at the high end of the factor).

 These jobs are compared and ranked –factor comparison

 Ranking of each job is made individually & then a meeting is held to
develop a consensus.
 The factors are then assigned values –factor valuation
 Remaining jobs are then evaluated based on benchmarked jobs.
Final step in factor comparison
 The jobs are then priced and the total pay for each job is
divided into pay for each factor.
 This process establishes the rate of pay for each factor for
each benchmark job
 After comparison,

 it is found that toolmaker skill

 is similar to electrician (5),
 mental requirements to welder (10)
 Physical requirements to again electrician (12),
 working conditions to mechanist (24)
 and responsibility also to mechanist (3).
 Thus, the wage rate for the job of toolmaker will be Rs. 54
(Rs.5 + Rs. 10 + Rs. 12 + Rs.24 + Rs.3).
 Pros /cons

 Analytical & quantitative method & is reliable

 Easy to explain this method to supervisors and union
members
 Relative value is easily understood
 Can be applied to a wide range of jobs.
 Can be applied to newly created jobs.
 Cons:
 Cumbersome & complex
 Needs to be re-established each time a new job is
added to the structure or an existing job changes since
these actions will affect the overall rankings
 Decision Band Method
 Originally developed by Professor Emeritus Thomas t .
Paterson in the 1970’s & refined by Ernst & young
compensation specialist for application in client
organization
 single-band analytical job evaluation method that fixes the
value of the job based on level of responsibility and
determines the level of responsibility based on the extent
of decision making involved.
 Value of job depends on decision making requirements of
the job
 Looks at essential duties of the job
 Level of each duty is determined
 Highest banded duty determines the Band of the job
 Steps to be followed
 Step 1 Emphasized on 6 levels of decision making or decision bands

 Step 2 Grading according to the difficulty involved in supervisory responsibilities

(Coordinating vs. Non coordinating)

 Structural Authority a) Coordinating - The responsibility of coordinating others at the

same grade level impacts the grade of the position itself when the position has full
responsibility for direct supervision over subordinate positions of the same level, placing
it at the coordinating grade within the band

 b) Non-coordinating If a position has limited responsibility while coordinating the work

of others, however not full supervision of staff; or supervision of staff that is at lower grade
levels, the grade level of the position does not increase.

 Sapiential Authority (Expert Authority) Coordinating – Advising ,

 Non coordinating informing – expert opinion is limited to department

 Step -3 sub grading based on ranking which can be three for lower ones and two for
highly responsible
1. Knowledge
2. Communication and Customer Service Skills
3. Mental Effort
4. Physical Effort
5. Working Conditions

 Step 4 - Review
 Decision bands
 Band F – Policy Making Decisions (board members
,CEO)
 Band E – Programming Decisions (senior mgt )
 Band D – Interpretive Decisions (middle mgrs.)
 Band C – Process Decision (supervisors,technical staff )
 Band B – Operational Decisions
 Band A – Defined Decisions
 Advantages/Disadvantages
 Less complex than other methods, resulting in less cost to
administer
 Can be applied to either individual positions or broad job
classes
 Requires comprehensive job description and reporting
system

 Disadvantages
 Non-traditional approach
 Results not as narrowly defined as other methods which
may cause employee concerns
Work Measurement approach
 Its an emerging Approach
 Enables & integrates multiple human capital processes
& empowers the HR function to perform
 Three primary areas where work measurement adds
value:

a. Work alignment
b. Work fit
c. Work Value
 To Conclude
 DBM is most appropriate & point factor is widely applied
method should be selected wisely
 Determine whether the JE method is to be used within only
a single job family or bargaining unit or across the whole
organization
 Define the job factors clearly
 Involve the stakeholders so they understand why you are
using a particular method
 Provide a basic understanding of the tool to those affected
 Review ratings with stakeholders to identify issues
 Validate job descriptions - questions about ratings result
since all methods are tied to the job descriptions
 Alternative Pay Systems
 Job evaluation system that supports your classification
philosophy and strategies
 Mix of reward versus entitlement (base) pay
 Multiple base salary structure(s)
 Individual versus group incentives
 Performance measurement
 Alternative Reward Strategies

 Broad Banding
 Skill Based Pay
 Individual Incentives
 Group Based Incentives
Creating job standards
 Conducting a job study or analysis of required work output.

 Deciding on the criteria that make one job more valuable

than another to management.

 Choosing a job-evaluation system that correlates jobs.

 Using a committee (drawn from management) to review

and approve a program and to price each job level.