What are the four factors that organizations usually use to determine the relative internal worth of jobs?
Job evaluation is a systematic method of determining a job’s relative worth within an organization. There are five commonly used approaches, says consultant Diana Neelman. Which is best for you? Show
Neelman is a principal and executive vice president with Compensation Resources, Inc. (CRI) in Upper Saddle River, New Jersey. She was joined in her presentation by Sara Schmidt, CCP, PHR, a consultant with the company. Their remarks came at a recent BLR-sponsored webinar. Here are Neelman’s five common methods and the characteristics of each: 1. Ranking MethodThis method ranks jobs in order based on each job’s perceived value in relation to the others, says Neelman.
2. Classification/Grading MethodWith this approach, generic job characteristics are grouped to reflect levels of skill/responsibility at a number of predetermined grade classifications, says Neelman.
3. Point–Factor MethodThis approach identifies job factors that add value and worth to a position. The job factors are separated into groups (i.e., skill, responsibility, effort) and assigned a numerical or weighted point value. The points for individual factors are added up to get a point value for the whole job.
4. Factor Comparison MethodWith this method, job factors are identified under primary groups (i.e., skill, effort, responsibilities, working conditions) typically up to five groups. Each factor is assigned a dollar value (as opposed to point value).
As you budget for 2015, you may be considering changes to your pay structure, to get maximum value from your employee compensation budget. Join us on November 6 for an in-depth webinar on how to determine pay grades, and laying the groundwork for getting your entire job value puzzle right. Register here! 5. Competitive Market Analysis MethodThis approach looks at external data, says Neelman. Job evaluation forms the basis for market pricing. You utilize job descriptions to compare jobs to like positions within the external marketplace. Pay data are collected from published sources and the value of the position within the competitive market is determined.
Goals of Market PricingMarket pricing is used by many organizations, says Schmidt, to determine:
Whether your goal is to reward performance, time, knowledge or a combination of all three, establishing and solidifying your pay grades is the first step in building an equitable, competitive compensation structure. Join us for an in depth webinar on Assembling a Pay Grade System: A Step-by-step Guide to Getting It Right. Collecting Pay Data—ExecutivesGathering pay data for executive positions is not the same as for lower positions. For publicly traded (for–profit) companies, you gather executive pay data from proxy statements of peer companies. The statements typically contain:
For not–for–profit executive pay analysis, use Form 990 data, says Schmidt. You won’t get as extensive information as from a proxy statement, so utilize published surveys as an additional source. In all cases of executive pay, it’s important to note organization size, industry, and geography, Schmidt says. In tomorrow’s Advisor, aging data and arriving at a market consensus, plus notice of a timely webinar— Assembling a Pay Grade System: A Step-by-Step Guide to Getting It Right. What determines the relative worth of each job in an organization?Relative worth is determined mainly on the basis of Job Description and Job Specification only. Job Evaluation helps to determine wages and salary grades for all jobs. Employees need to be compensated depending on the grades of jobs they perform. Remuneration must be based on the relative worth of each job.
What are the 4 compensable factors?The Equal Pay Act of 1963 has defined 4 most basic compensable factors: effort, skill, responsibility and working conditions. There are usually 5 to 12 compensable factors in any evaluation procedure. The compensable factors are different for different evaluations.
What are the factors determining job evaluation?Skills (years of experience, level of education and overall ability) Responsibilities (number of direct reports, fiscal accountability and the list of responsibilities of the position itself), Mental and physical effort (degree and amount of concentration, level and frequency of physical effort)
What is the process of determining the relative worth of jobs?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.
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