5 Methods & Guides for Job Evaluation

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How does an organisation know if it has a fair pay system in place? Many companies attempt to quantify their salary standards through a process known as job evaluation, using predetermined criteria to confirm that all team members are justly compensated for their hard work. 

Measuring the true value of all roles across an organisation is no easy task and certainly not without its drawbacks. But to date, it’s one of the most effective tools that teams have to assess whether they’re paying employees equitably. Read ahead to understand what job evaluation is, the available evaluation methods and how to overcome typical challenges before they arise.

Key Facts

  • Job evaluations are necessary to confirm that employees are being paid fairly and equally company-wide.

  • There are several job evaluation methods and the one that’s best for your company may depend on your industry and company culture.

  • While job evaluation steps are generally similar across the different methods, you may face challenges regarding bias, transparency and investment in the process. 

What is job evaluation?

Job evaluation is a method for establishing a fair compensation structure for jobs within a company. It’s a systematic process designed to ensure all employees receive equal pay. The technique involves comparing job functions across an organisation, usually with criteria developed by the HR team. Depending on the industry, trade unions may also be involved in job evaluation discussions to confirm that all salaries represent the true value of all roles. 

Five methods to conduct a job evaluation 

Organisations can choose from different job evaluation schemes to assess pay structures based on what fits best for their industry and company culture. Businesses may tweak an evaluation method for their specific need but these are some of the most commonly used job evaluation processes. 

1. Job ranking

This evaluation scheme rates jobs in a hierarchy from most to least important. The significance of a role is usually defined by the impact it has on an organisation, the seniority level and knowledge or skills required. For example, a technology startup would rank an engineer above a data entry clerk but below the Chief Technology Officer.  

This approach can be helpful for smaller organisations with 100 or fewer employees but the criteria for ranking aren’t always clearly defined. The biggest drawback to this approach is that organisations run the risk of personal bias affecting the rank order. 

2. Job classification

Sometimes referred to as job grading, this method also ranks jobs in order of most to least important. The grading system includes different categories to help HR teams separate roles into groups for easier evaluation. This can include categories for different job “families” in the same department or with similar responsibilities, like marketing. Job classifications are also broken down by seniority and difficulty level.  

Many medium to large size organisations with clear cut hierarchies, like universities, frequently use classification for job evaluation. This method doesn’t always work for the largest businesses, though. While this system aims to be objective, classifications may not always account for every job task in an employee’s purview. This is especially true for employees who have taken on responsibilities over time outside of their original job description. 

3. Point factor

With the point factor method, a point value is assigned to specific aspects of a job, including experience level, skills complexity and decision-making responsibilities. After points are determined for each job, total points are compared to the salary range for each role, sometimes on a line graph. The points and pay ranges should correlate with each other but outliers can be handled on a case-by-case basis. This method can be time-consuming and expensive so it’s usually best for larger companies where the return on investment is worth the effort. 

4. Factor comparison

The factor comparison method blends the strategies prioritised with job ranking and point factor evaluation. HR teams will rank jobs by a specific factor, such as skills, financial decision-making or management responsibilities. Points are then assigned to each job on the ranked list and the process is repeated for each job factor. A total value is assigned to each role at the end once all factors have been reviewed for each role. Like the point factor method, assigning point values can be a time-consuming process. 

5. Market pricing

While the above evaluation methods focus on internal information, the market pricing process looks at external information to determine pay fairness. HR teams will review public pay information for similar organisations to determine if they’re paying a fair market rate. This can be a great way to confirm if your business offers a competitive pay rate. But it doesn’t always account for internal factors that might make a role worth more than the market rate might suggest. 

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What are the steps in the job evaluation process?

While each evaluation method differs in evaluation criteria, most job evaluation processes follow the below workflow. 

1. Planning

The first phase consists of selecting your preferred job evaluation method. It’s helpful to consider the amount of time and money each method will take, as well as size and mission of your organisation. If your company has a particularly complex staff hierarchy, you may need to customise your chosen job evaluation scheme. If none of the existing methods fit your business, external advisors may be able to assist with creating a fully custom scheme for your organisation. It’s important to consider if complete customisation is worth the cost, though. 

2. Developing evaluation criteria

In the second phase, your team and any external consultants will determine which job elements or factors to include. They’ll also create categories for seniority level and job families if relevant for your chosen evaluation method. 

3. Validation and analysis

After data has been gathered for each job, it’s reviewed and analysed based on the previously determined ranking criteria. HR may have to decide how to evaluate outliers in the first draft of results. Once all data has been fine-tuned, a fair pay structure will be created from the findings. 

4. Implementation

Once all roles have been evaluated and a fair pay structure has been finalised, your HR team should develop a plan to communicate the new structure with staff. Your employees should have the opportunity to communicate any concerns if the structure has changed drastically. Giving employees a voice in this decision-making process is important and you should also allow room to make changes as appropriate based on their feedback. Once everyone is in agreement on the new structure, you can apply the new structure. 

The most common challenges with job evaluation 

While job evaluation is intended to be fair and objective, this is not always the case. There are some potential pitfalls to consider when determining your method of job evaluation. The good news is that with mindful planning, these challenges may be avoided. 

Time and cost

The more detail you apply to job evaluation, the more likely you are to end up with fair assessment results. But the downside is that the more granular your evaluation criteria are, the more time and money it will take to complete an evaluation. A high level of customisation might add to your costs, but tailoring your evaluation method may also help reduce time and cost. Consider your overall objectives with conducting a job evaluation and select a method that balances flexibility with expense and labour. 

Bias and lack of transparency 

The goal of job evaluation may be to implement a fair pay structure but impartiality can be challenging. Subjective job factors, such as organisational impact, can be clouded by personal biases. A study by the Institute for Employment Studies found that even schemes designed to be objective such as factor comparison can show signs of bias

For instance, sales that are revenue-generating are undoubtedly important. It may be easy to overlook the contributions of sales team support staff who don’t complete any sales. But support staff may routinely prepare many of the materials needed to close a deal. This is why having a diverse group conducting the evaluations is key to getting a holistic range of perspectives. 

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Managing employee expectations

The results of a job evaluation may sometimes result in a pay increase, but this isn’t always the case. Therefore, it’s important to communicate expectations early on with employees so you don’t have to manage disappointment later on. If a particular role is ranked or graded lower than the employee in that title may have expected, that also leaves opportunities for frustration. Transparent communication is key to managing workplace change and keeping employees happy. 

The role of technology in job evaluation

Technology can streamline and automate many of the time-consuming tasks associated with job evaluation. If you’re using multiple sources and criteria, such as HR analytics and reports, job evaluation software can help streamline data collection and keep you organised. 

Some platforms feature the ability to evaluate dozens of job factors for a fully comprehensive analysis. Many job evaluation software platforms also have the capability to generate evaluation reports from input data based on your chosen scheme. And some platforms can assist in drafting an equitable salary structure once your evaluation is complete. 

More platforms are beginning to integrate artificial intelligence (AI) and machine learning into the job evaluation process to save your HR team valuable time. Of course, there still needs to be some human oversight to ensure complete accuracy with AI-powered evaluation systems. However, the time they save can streamline the entire process considerably. 

Frequently asked questions

What are the benefits of running job evaluations?

Job evaluation can provide concrete criteria for an organisation’s specific pay structure. The job evaluation process gives organisations detailed insight into the actual value of each role it oversees. The evaluation procedure can ensure that current employees are being compensated equitably. It also helps organisations set competitive baseline salaries for future employees. 

What is a job evaluation and how does it work?

Job evaluation is a process used to determine the appropriate salary for roles within an organisation by assessing various factors such as seniority, expertise, education, and daily functions. The 5 prevalent methods of job evaluation include job ranking, job grading or classifications, point factor, factor comparison, and market value, with each method suiting different organisational structures and sizes.

What are the disadvantages of the job evaluation process?

Ideally, a job evaluation process is completely objective. In reality, one of the greatest job evaluation challenges is ensuring that assessment remains bias-free. Additionally, job evaluation can be an incredibly time consuming and costly process. Employees may also be disappointed if their role is not ranked in accordance with their understanding of their job’s impact and importance. HR teams can avoid many of these challenges with careful consideration and planning, though. 

What is the difference between job analysis and evaluation? 

Job analysis and job evaluation have some similarities but differ in purpose and application. Job analysis focuses on understanding the tasks and responsibilities of a role but doesn't assign a monetary value to it; its output is detailed job descriptions. Job evaluation, however, determines a job’s worth and creates an ordered ranking of all jobs within an organisation. While job evaluation is typically an ongoing process in organisations, job analysis may be conducted intermittently, particularly when new roles are created.

Job evaluations can help reveal issues of pay equity

Job evaluation is an important tool for companies to ensure their teams are being paid fairly. By looking at areas including job responsibilities, education requirements and competitive market salary rates, organisations can get a more accurate picture of their pay system. 

This can help companies improve retention and attract high-quality talent in the long run. Job evaluation is certainly not without its flaws. But with proactive planning, it can be a helpful approach for confirming that your business is living up to its values of fairness and equity. 

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