Job Evaluation, Pay Structures and RewardsChapter 3

Value of job

• In this era of globalisation, where the concept of global village has emerged, a great deal of care and attention is paid to the value of job.

• What a job has to be paid is greatly influenced by the value of judgement about the worth of a job.

• Orgs have different jobs which are of different worth.• Job evaluation is a systematic technique which aims at

determining the worth of a job.

Job Evaluation

• “The process of analysis and assessment of jobs to ascertain reliably their relative worth using the assessment as a basis for balanced wage structure”.

• The basic objective of job evaluation is to ascertain the relative worth of each job through an objective evaluation so that relative remuneration may be fixed for different jobs.

Process of Job Evaluation

• Analyse and prepare job description

• Select and prepare job evaluation plan

• Classify jobs into different categories

• Install the job evaluation programme

• Maintain the

programme.

Job Analysis

Job Description Job Specification

Appointment of Committee

Training

Defining Criteria Selecting methods Job classification

1. Job Analysis

• First step in job evaluation• It includes job description and job specification• Job description: responsibilities involved in the

performance of the job• Job Specification: Attributes required in the job

performer.

2. Appointment of committee

• Members are from different departments of the organisation, outside experts etc.

• HR person generally acts as the chairman of the committee.

3. Training for Job Evaluation

• Following issues are generally discussed and doubts cleared:

1. What is job evaluation2. Why does the company need job evaluation3. How well it work? Etc.

4. Defining criteria

• Identification of crucial factors like:ResponsibilitySkill EffortWorking conditions etc.• Criteria means a standard of judgement is to be fixed.

5. Selecting Methods

• Select a suitable method of evaluation• Different methods include, ranking method, grading

method, point method and factor comparison method

6. Job Classification

• Various jobs are classified into different grades.• According to this classification, a job hierarchy is made,

which shows the relative worth of the job.

Methods of job evaluation

• Four methods are: Ranking method, job grading method, point method and factor comparison method.

• First two are non-quantitative, traditional or non-analytical methods

• Next two are quantitative or analytical methods• The basic difference between qualitative and quantitative

method is in terms of consideration of job as a whole versus consideration of different components of a job.

1. Ranking Method

• The whole job is compared with others and rank is provided on the basis of this comparison.

• Each member ranks each job independently on the basis of comparison based on job analysis.

• Repeat the procedure for the reliability of the method.• If any difference in opinion among the members, the

matter is settled by mutual consultation or by working out the average.

2. Grading Method

• Also known as job classification method.• It establishes various grades for different categories of

jobs• A number job classes or grades is decided on the basis of

job analysis• Job class is prepared covering all jobs fall in a class• A job is placed in the class with which it matches the best

according to its characteristics.

3. Point method

• Widely used and is a quantitative as well as analytical method.• It determines the relative worth of the job on the basis of points allotted to each

specific factor of a job.• The sum total of the point is taken and determines the relative worth of the job.• Steps:1. Jobs are broken into different components. These components are the factors

like skill, responsibility, effort required.2. Major components are further broken into minor factors like skill into

education, experience, initiative etc.3. Total number of points allotted to each job factor is divided into points to

different minor job factors.4. Each minor factors is scaled on degree is assigned a particular point depending

on the importance of the degree in minor factor.5. Evaluation is done on the basis of comparing the various degrees of job factors

and is aggregated to find out the total points scored by a job.

4. Factor comparison method

• Also known as key job method• Five standard factors usually used for the comparison are

mental requirement, skills, physical requirement, responsibility and working conditions.

• Each factor of a job is compared with the same factor of the key job and rank is awarded and is repeated for all other factors.

• The relative worth of a job is determined by adding the ranks obtained by different factors of a job.

Pay Structure

• The usual outcome of a formal job evaluation programme is a new or revised grade structure, which together with market rate intelligence provides the basis for designing and managing pay structures.

• Pay structures provide a framework for managing pay.

Graded pay structures

• A grade structure provides hierarchy of grades, bands or levels into which groups of jobs that are broadly comparable in size are placed.

• It is used as a part of non-financial reward processes.• A grade structure becomes a pay structure when pay ranges

or brackets are defined for each grade, band or level, or when grades are attached to a pay spine.

• Pay spines consists of a hierarchy of pay or spinal column points between which there are many increments and to which are attached grades.

• Graded, broad banded or family structures:Contain the orgs pay ranges or scales for jobs grouped into

grades, bands or job family levels.Define the different levels of pay for jobs or groups of jobs

by reference to their relative internal value as determined by job evaluation, to external relatives as established by market rate surveys and, where appropriate, negotiated rates for jobs.

Provide scope for progression in accordance with performance, competence, contribution or service.

Spot rates

• Often used to jobs at senior management levels or those not covered by the pay structure.

• May also be called the “rate for the job”, more typically for manual jobs where there is a defined skilled or semi-skilled market rate.

Individual job grades

• Are attached to jobs and not to person.• Individual job grades may be restricted to certain job, for

e.g. more senior managers, were flexibility in fixing and increasing rates of pay is felt to be desirable

Rationale for grade and pay structures

• Grade and pay structures are needs to provide a logical designed frame work within which an organisation’s pay policies can be implemented.

• A grade and pay structure is also a medium through which the Org can communicate the career and pay opportunities available to employees.

Criteria for grade and pay structure

• Grade and pay structure should: Be appropriate to the culture, characteristics and needs of the Org and its

employees. Facilitate the management of relative jobs, and the achievement of equity,

fairness, consistency and transparency in managing grading and pay. Be capable of adapting to pressures arising from market rate changes and

skill shortages. Facilitate operational flexibility and continuous development. Provide scope as required for regarding performance, contribution and

increase in skills and competence. Clarifying reward, lateral development and career opportunities. Be constructed logically and clearly so that the basis upon which they

operate can readily be communicated to employees. Enable the org to exercise control over the implementation of pay policies

and budgets.

Types of grade and pay structures

1. Narrow graded structures (Single-graded) Universal type of structure in private sector Pay range is attached to each grade (Between 20%-50%

above minimum) “Reference Point or Target Salary” is referred to the fully

competent individual Provide Scope for Pay Progression

2. Broad-banded pay structuresBroad-banding means that the number of grades is compressed into a relatively small number of much wider bands in which pay is managed more flexibly than in a conventional graded structure, and increased attention is paid to market relatives.There are four or six bands in such structures.Jobs may be placed in the bands purely by reference to market rates or by a combination of job evaluation and market rate analysis.The bands can span the opportunities previously covered by a number of separate grades and pay ranges.

3. Career family structures Consist of jobs in a function or occupation (Ex. marketing, operations,

finance, IT) Jobs are related through the activities carried out and the basic

knowledge and skills required. But the levels are differentiated through responsibility, knowledge,

skill or competence needed. In effect, a career structure is a single – graded structure in which each

grade has been divided into families. Job evaluation indicates the same range of scores. Similarly, the pay

ranges in corresponding levels across the career families are the same.

4. Job Family Structures Based on common processes (ex. IT, finance, HR) Divided into 3-5 families and again sub-divided into

levels (5-7) Levels are defined in terms of accountability, skills and

knowledge No commonality (each job family has its own grade and

pay structure)

Performance management and Pay

• Contingent and differential pay is an important element in many performance management schemes. This is because paying for performance or for competence, or both is regarded by many organisation as desirable for three reasons:

• It motivates people to perform better• It delivers the message that performance and competence

are important• It is fair to reward people for their competence.

Performance Related Pay (PRP)

• Individual PRP relates pay progression or bonuses to the assessed performance of the individuals

• Methods of operating PRP varies considerably..• A pay structure is designed to provide scope for pay

progression within pay brackets attached to job grades.

• Criteria for PRP Individuals and teams should be clear about the targets and standards of

performance required. They should be able to track the performance against those targets and

standards. They must be in a position to influence the performance by changing their

behaviour and decisions. They should understand what rewards they will receive for achieving end

results. The reward should follow as closely as possible the accomplishment that

generated it. The reward should be worthwhile. The results required to generate the reward should be attainable, although

not too easily. The basics upon which rewards are made should be communicated

positively and should be easy to understand.

Competence Related Pay

• Provides for pay progression to be linked to assessment of the levels of competence that people have achieved.

• Features: Basis of SchemePeople receive financial rewards in the shape of increases to their base pay by reference to the level of competence they demonstrate in carrying out their roles. It is a method of paying people for the ability to perform now and in future. Consolidated pay Increases Pay Progression:The rate and limits of progression through the pay brackets can be based on ratings of competence using PRP- type matrix, but they may be governed by more general assessment of competence development

Team Based Pay

• Provides rewards to teams or groups of employees carrying out similar and related work linked to the performance of the team.

• Performance may be measured in terms of outputs or the achievement of service delivery standards or both.

• The quality of the output and the opinion of customers about service levels are also taken into account.

• Team pay is usually paid in the form of bonus shared among team members in proportion to their base rate of pay. Individual team members are eligible for competence related or skill-based pay

Contribution Related Pay

• It is the process for making pay decisions that are based on assessment of both the outcomes of the work carried out by individuals and the levels of competence and the competency that have influenced the outcomes.

• It is focused on what people in organisations are there to do, that is to contribute by their skills and efforts to the achievement of the purpose of their Org

Skill Based Pay

• Provides employees with a direct link between their pay progression and the skills they have acquired and can use effectively.

• It focuses on what skills the business wants to pay for and what employees must do to demonstrate them.

Gain Sharing

• Also known as production incentives.• The basic objective of any gain sharing programme is to

provide incentives to employees on achievement of unit/ organisational level targets in terms of production schedules, project executions, customer satisfaction, improvements in quality standards, better safe records, optimisation of company resources, cost saving measures etc.

Profit Sharing

• A realisation that workers contribute significantly to the increase in profits has encouraged this system.

• The workers are integral part of any org and their contribution to its prosperity should also be rewarded by making them recipients of profits.

• It is a method of remuneration under which an employer undertakes to pay his employees a share in the net profits in addition to their regular wages.