How do you know you are paying your people fairly? Job evaluations—determining pay rates—are one of the more difficult responsibilities HR has because of the emotional toll it can take on the workforce. But not all job evaluations are bad! Some can be used to increase salaries and remove inequities, both of which will improve morale. Regardless of the purpose, starting a job evaluation the right way will help it go smoothly, and ultimately get you the best results.
How do you know what a certain position should pay? What impact does a position have on the business’s success? What do other companies pay for this set of responsibilities? These are common questions when deciding how to compensate a job in your organization. To help make this determination fairly, HR engages in what’s called a job evaluation. Once a job evaluation has been done and you've posted your job listing online, then comes the hard part: keeping track of all your applicants and interviewing them in a timely manner. Luckily, Eddy has created an HR software that helps you do just that in the simplest way possible. Check out Eddy today to see how we can help you thrive not only during the hiring process but also throughout the entire employee lifecycle.
A job evaluation is the process of establishing how much compensation to allocate to a job. This process involves using internal and external data to determine what a given position’s salary range should be, what related positions should pay, and what benefits are appropriate for a given job. Common job evaluation examples include single-position evaluations for newly created jobs, reevaluations of jobs to make salaries more competitive or equitable, and company-wide job evaluations used to restructure the entire compensation program.
A performance appraisal evaluates an employee, whereas a job evaluation evaluates the position itself, without considering who is in that position. (Performance appraisals are also called performance evaluations or performance reviews.)
Although the process can be difficult, job evaluations bring a lot of benefits to the table, including:
Job evaluations come in many forms and sizes, but all methods boil down to two factors: comparison and data. That is, all job evaluation methods either help you understand how a particular position compares to other positions within the organization (internal comparison), or how a position is valued across the job market (external comparison). All evaluation methods use either qualitative data, which makes comparisons by evaluating the qualities and characteristics of a position or quantitative data, which makes comparisons by attaching numerical values to each position.
Classification, a qualitative method, involves either writing or analyzing job descriptions and then placing them into separate grade classifications. Grade classifications should reflect different job characteristics, such as seniority, job responsibilities, and skill level. Grade classifications might include vice president, director, assistant director, senior manager, manager and coordinator. Grades should be created for each job family or department. Once they’re classified, their relative impact on the company’s success will determine compensation. This method is relatively easy to complete. However, it’s also largely subjective.
The point factor method is the most commonly used quantitative method. It uses a point system to determine the appropriate compensation for a given position. This point system is created by establishing factors that influence compensation (such as skill or effort), and then assigning points to a position based on these factors. The total number of points determines compensation.
Ranking is a very simple qualitative method where all jobs in the company are ranked into a hierarchy. The more important a particular job is to the company, the higher it’s ranked. Unlike classification, ranking doesn’t involve creating grades. This method is very subjective and is best used along with another method to prevent errors.
The factor comparison method is a complex quantitative method that combines the point factor method and the ranking method. First, just like the point factor method, factors that influence compensation must be chosen and assigned. Then, instead of establishing a point system, benchmark jobs that HR knows are paid appropriately are used to determine how each factor should be measured. Monetary values are then used in place of points. These values are then applied to other jobs to determine compensation.
Competitive market analysis is a quantitative method focused on determining how competitive a company’s salaries are. This method is straightforward. Analysis involves obtaining market data—usually from third parties like PayScale or Glassdoor—and then comparing the salaries in the data set to the company’s salaries for the same jobs. External data usually needs to be purchased.
No matter the method or size, a successful job evaluation requires planning and time. Below, we’ve created a step-by-step process to help you plan for any job evaluation.
Is this a job evaluation for one job, a department, or the entire company? Is the evaluation for a new job, or are you reevaluating a job? Are you adjusting to budget cuts or growth? Answering these and other questions related to scope and purpose will help you determine how much time the job evaluation will take, who to communicate and collaborate with, and which method is most appropriate.
It’s important to choose the best method for your established scope and purpose. For example, if your purpose is to determine whether your compensation plan is competitive, you won’t use the same method you would use to adjust to a new budget constraint. Answering the questions in Step 1 will help you determine which method will be best suited for you. However, other factors to consider include:
To execute a job evaluation, you’ll have to pull a lot of data from your HRS software, if you have it, and other locations. Information you will need includes:
Some of this information may not be readily available. For example, you may need to create questionnaires for supervisors or employees, or request approval to contract with a third party for external data. If this is the case, consider preparing these requests before launching the evaluation.
With most job evaluation methods, you will have quite a bit of flexibility to decide how it’s structured and rolled out. You will be able to choose which factors to use, how to organize your company hierarchy, or which third parties to use for any external data. Once you make your initial choices, test your method using sample jobs or sample job groups in your company. Troubleshooting in this way will increase accuracy and help reveal subjectivity.
Job evaluations often require input from managers and employees on issues such as current work responsibilities. Requesting this kind of input can feel intrusive. If communication is not clear and transparent, employees can justifiably become upset and concerned about their job security. In turn, job evaluations can become very difficult to execute. To gain support, keep stakeholders such as supervisors informed of progress, communicate updates ahead of time so that no employee is caught off guard, and be transparent about any policies associated with the job evaluation.
HR professionals get handed a lot of difficult responsibilities and that can lead to feelings of inadequacy and doubt, especially if you're fairly new to this career. Eddy is completely on your side though and is here to help every step of the way. Check out Eddy today to see how we can simplify your HR tasks and responsibilities so you can enjoy the fun and exciting parts of being an HR professional even more.