A Full Guide to Job Evaluation for HR
Job evaluation is a complicated but important process in achieving pay equality. In this article, we will explain what job evaluation is, discuss the four key methods of job evaluation, and we will take you through the full job evaluation process. Let’s dive in!
What is job evaluation? A definition
Job evaluation methods
The job evaluation process – 4 steps
Step 1 – Planning & diagnosis
Step 2 – Design & development
Step 3 – Validation & modeling
Step 4 – Communication & roll-out
What is job evaluation? A definition
Job evaluation is the systematic process of determining the relative value of different jobs in an organization. The goal of job evaluation is to compare jobs with each other in order to create a pay structure that is fair, equitable, and consistent for everyone. This ensures that everyone is paid their worth and that different jobs have different entry and performance requirements.
Job evaluations are developed by HR, often together with workers unions and other social partners and commercial consultancy companies.
The advantage of job evaluation is that it does not take into account the qualities of the job holder. According to a report on this topic by the European Commission, the relative worth of a job is assessed irrespective of the qualities of the specific job holder.
The relative worth corresponds to a ranking, which in turn corresponds to basic pay brackets or scales (called wage grids). Personal qualities of the job holder (including seniority, education level, tenure) are rewarded by an entitlement to higher steps within the applicable pay bracket.
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Job evaluation requires some basic job analysis to provide factual information about the jobs concerned. The starting point is often the job analysis and its resulting job description. Based on this, the job is evaluated. One of the key criteria in the evaluation is the added value of the job to the organization. Based on this evaluation, the job is added to the job structure. The resulting structure ensures pay transparency and equity between gender and minorities.
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 SMEs 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.
Job evaluation methods
There are different methods that can be used for job evaluation. The easiest way to split these up is to make a distinction between qualitative and quantitative methods.
Four common job evaluation methods
|Job to job comparison||Ranking method/ pair comparison ranking||Factor-comparison method|
|Job to pre-determined grade comparison||Job classification||Point-factor method|
Each of these methods has its own advantages and disadvantages. The qualitative methods are usually faster while the quantitative methods are more objective and take into account required skills and responsibilities. The best approach is always a combination of methods. We will give a brief explanation of each of the methods.
|Ranking method/ Paired comparison||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 seniority. This approach is only recommended for smaller organizations with fewer than 100 jobs|
|Job classification||Jobs are ranked based on a pre-determined grade comparison. An example classification is a CEO, vice president, director, manager, and operator. This is a pre-determined ranking that many US-based organizations use. Grades are created among job families (e.g., marketing, HR, sales). For more information, see our full article on job classification.|
|Factor-comparison method||Jobs are ranked on a series of factors, the most frequently used factors being knowledge & skills, communication & contacts, decision making, impact, people management, freedom to act, working environment and responsibility for financial resources. Each factor is assigned points and the total number of points indicate the job’s ranking|
|Point-factor method||Jobs are assessed on required know-how, problem-solving abilities, and accountability. Each factor is assigned points and the total number of points indicates the job’s ranking.|
|Market pricing||Assessing rates of pay by reference to market rates for comparable jobs leading to pricing the job based on what it is worth. Does not take internal equity into account, nor the fact that the internal value of a job may differ from their market value. Market pricing can perpetuate marketplace inequalities, defeating the purpose of the job evaluation.|
Depending on the organizational size and complexity, different methods are chosen. The paired comparison method (as displayed below) works well for smaller organizations, while a factor-comparison or a point-factor method works better for larger organizations.
Of all job evaluation methods, the point-factor method is probably the best known. On a high level, the steps for this approach are as follows:
- Jobs are listed
- Evaluation factors are defined
- Scoring degrees on these factors are determined
- Per job, points are allocated for each factor
- A wage structure is defined
- Adjustment of the existing wage structure
The result is a 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. We will go into more detail in the next section.
The job evaluation process: 4 steps
The job evaluation process involves four steps. These steps are planning and diagnosis, design & development, validation & modeling, and communication & roll-out.
Phase 1. Planning & diagnosis
In this phase, the job evaluation project is started with an initial workshop. During this workshop, the evaluation is scoped and approaches for evaluation are decided on.
In terms of scope, decisions need to be made on cost, time constraints, the degree of rigor applied, administration, tooling & software, how much external help is required, how to build on previous projects, and how job evaluation will be used to support equal pay.
The organization also needs to decide on their job evaluation scheme. There are multiple schemes with different degrees of customization.
- 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 like an (outdated) job framework that is already in place and builds on top of that. This provides a good starting point, leads to faster implementation, and helps to create employee buy-in. Its biggest con is that the framework needs to be sufficiently revised as it may otherwise not suit the organization.
- Tailor-made. This is a fully customized scheme, developed in-house with the help of external advisors. It leads to a great fit with the organization, the participatory process leads to buy-in and enables alignment with a competency framework. The drawback is that the process will take longer and is a costly exercise.
Next, benchmark jobs are identified, data collection is planned, and a communication plan is created.
Phase 2. Design & development
In the next phase, the evaluation elements and levels are determined. This often happens through a workshop. In this phase, it is important to identify elements that are relatively timeless. Keep in mind: the job scheme is relevant for as long as the elements it is based on are relevant.
Because of the cost and effort to create a job scheme, they could stay relevant for well over 25 years. In our article about job classification, I give the example of Russian organizations that still work with the frameworks provided by the state during the USSR.
Once this is all done, data on the different roles in the organization is collected.
Phase 3. Validation & modeling
In the third phase, the results from the data collection are analyzed and the weightings of the different elements are discussed. This may require some fine-tuning as initial definitions may skew the results.
Next, a pay grade structure is drafted, and jobs are categorized. There will always be a set of jobs that do not match the pay grade structure. An example could be specialist roles in artificial intelligence and machine learning that are very scarce while crucial for the company’s future. These may have to be put on a different salary scale. The risk here is that these jobs may be much more abundant in say 10 years, so by then they may be overcompensated so this may have to be revised later.
Phase 4. Communication & roll-out
In the final phase of the job evaluation process, the structure is implemented. Best practices are to explain everyone affected why their pay grade structure may have changed. There should also be an opportunity to appeal decisions that are perceived as unfair. Here it is important to hear and investigate what employees have to say.
This phase will be easier if there is buy-in from the organization. Also note, lowering salaries for workers may not be possible as wages could be protected under national labor laws or it may prompt people to leave the organization. Taking all of this into account will be an administrative challenge.
That is it for the job evaluation. There is of course much more that can be said about this topic but that would require us to write a book. Resources we can recommend are 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.
Job evaluation is the systematic process of determining the relative value of different jobs in an organization. The goal of job evaluation is to compare jobs with each other in order to create a pay structure that is fair, equitable, and consistent for everyone.
Four common job evaluation methods are the ranking method, job classification, the factor-comparison method, and the point-factor method.
The job classification method ranks job based on a pre-determined grade comparison. An example classification is a CEO, vice president, director, manager, and operator.