To give a straight definition, it's the procedure of weighing up an employee's role and orientating it in the wider company structure. The weight given to an employees role will then provide the basis for deciding their salary.
It's important to focus on getting this right for a couple of reasons. Firstly, a clear, rational pay structure and obvious progression helps your employees to understand what qualities and skills you value. In turn they will focus on these and you will find that you can use the structure of pay in your company to ensure your teams are aware of the direction you want the company to go in.
Secondly, a clear career progression structure, as outlined by your compensation, will attract driven and motivated employees to your company as they will value the clarity with which you have outlined a path to success and being valued highly in the company.
A final and very important consideration is, if your job evaluation process is rigorous it ensures equity between jobs relative to their worth to the company. If you are not rigorous in developing a pay structure in your company, then you open yourself up to the risk of equal pay claims, a subsequent bad reputation and the loss of future talent as a result. If you get it right, however, a whole host of good PR and opportunities to boost the image of your company as forward thinking and fair, with good values.
Here is a clear step by step guide to undertaking a job evaluation that should help you on your way to providing a fair and equal pay structure that will benefit you in all of these ways.
This is also known as job analysis and its findings are what goes into a job description. This involves answering questions such as: what the important tasks of the job are, how they are carried out and what skills and qualities are needed for success. It is essential that this task is done well and analytically, without being vague. Its findings will be the underpinning for the entire job evaluation process.
There are a number of job evaluation methods to choose from. These are systematic and formalised systems for evaluating jobs. It is worthwhile noting which ones are used most commonly in your sector. Using the most common and most suitable method can give you the security that your pay structures ensure equity in pay.
In this guide we use the Hay or Point method, this is the most common method for job evaluation. Although the outcome of job evaluation should be the same for any method the process might have to be adapted slightly for different methods at later stages.
This method is probably the simplest as you simply order the jobs in your organisation from high-to-low in terms of their value to the company. Jobs are examined as a whole instead of individual factors. This method is best suited to a small company without too complex a structure. There are obvious flaws in this system. Perhaps most obvious would be the risk of demotivating people in low-ranked jobs. This method is also subjective in ranking jobs because they are judged as a whole.
This is again a simple method in concept. Basically, a company will set up a pre-determined number of classifications, for instance, three classifications: low-skilled, high-skilled and executive. Then you assign different jobs to different categories which then becomes the pay structure. The pay system is very easy to understand which is of benefit when communicating it to your employees and it also takes into account all aspects of the job before assigning a job to a specific classification.
The method’s problem is it is too broad in its classification of jobs. You risk having very different jobs in the same classification, poorly fitting class descriptors to specific jobs, and oversimplification of the differences between jobs and grades.
This is considered the most reliable method and is also the most widely used. Jobs are expressed in terms of fundamental ‘factors’ for instance skills, problem-solving and accountability. These are then split into sub-factors and ordered in terms of value to the company. You then find the number of points that a job gets from the number of points assigned to each sub-factor for a job. This gives you the relative worth of a job relative to the rest of the roles in your company which leads you to your pay structure. This method is best for large companies with large and diverse teams.
Given that you choose to use the Hay Method mentioned in the previous step, you need to choose the factors that you value most highly within the roles that you are evaluating. To do this ask what makes one job more valuable to your company than another. These factors will become the unit of measurement for each role to allow you to standardise your evaluation. This will also let your employees know what you want to reward.
The factors you choose should be evident in lesser or greater degrees across the majority of roles in your company. If they are not, then the unit of measurement is not useful. The factors need to stand alone and not overlap. The factors should be as objective as possible and reflect the whole company’s preferences not simply your own.
This is where you get down to the nitty-gritty and where the job analysis from your first step becomes essential, as you assign numbers to each factor for each job you are evaluating. It’s not always easy to remain objective at this stage so bear this in mind and make sure you have well-defined factors as explained in step 3.
If you have successfully assessed the job, analysed its demands and requirements and set out good units of measurement with your factors, then this part is straightforward as each job you assess spits out a number the ranking should ‘take care of itself’.
This stage might be seen as a problem spotting stage. It can allow you to find mistakes where roles you know should be higher ranked than others are not where they should be. This will be due to a failure in one of the three aspects from above, either the job analysis, the factor and sub-factor definition or finally in the assessment of the job against the factors. You will have to go over each, in turn, to find out why your evaluation isn’t giving you the expected outcome.
But remember, there is a chance that the problem might instead be in your perception and not the evaluation. You might need to ask yourself if you are being too subjective with your expectations.
This is the step where you formalise the hierarchy of your pay structure and use it to highlight how individuals can develop over their careers by moving up through your pay structure. The structure should correspond with rewards for the values, skills, and qualities that you value in your employees.
To make sure the ranking and structure does this properly, it's a good idea to gather a team from across the spectrum of expertise and skillsets within your company to assess this. You should make sure that you properly record the decisions and research throughout this process as it can add significant security against unequal pay claims.
You should always, at the end of your job evaluation make the pay structure clear to your employees and use it to develop your teams in the direction your company wants to go. It can be easy just to view this process as a formality and a background process but the most effective job evaluation is a tool for developing your teams and employees. You should endeavor to use it within HR development programs, recruitment drives and in PR to best show what you value and that you are thorough and fair in the way you reward employees.
The pay structure you can develop through this step by step guide is a fundamental reflection of what you value from your employees. You can develop your teams, your employees, and their skills and experience, and incentivise each to develop themselves, by really shouting about the message that your pay structure sends.
You have invested significant resources in building the pay structure through your job evaluations so you need to optimise its effectiveness by using it. You can develop your current employees, showing them how they will be rewarded, you can attract new employees by making it clear how you will reward them and how they can progress with the right skills and experience. Finally, you can also represent your company as forward-thinking, fair and clear in its values.
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