2. Equity : Conceptual Foundation
• Employee equity
– Comparisons among individuals doing the same job for the same
organization
– Should all such employees receive the same pay? Or should one
programmer be paid differently from another if one has better
performance & / or greater seniority?
– How much do you wish to pay accountant A in comparison with
accountant B based on their performance and length of their service, etc.,
within the same organization?
3. Job Evaluation : Perspective & Design
• Results of Job Analysis & Job Description serve
as input for evaluating jobs & establishing job
structure
• set of systematic procedures to determine the
relative worth of jobs within the organisation
• Job Evaluation involves the systematic
evaluation of the Job Description based on many
factors:
– Content of the work
– Relative value of the work to the organization
– Culture of the work place
– External market forces
4. • It is the process by which work at various levels is compared
within an organization.
• The ultimate goal of job evaluation is the establishment of a
hierarchical structure of jobs based on a common set of
criteria. These evaluation criteria are generally expressed in
the form of “compensable factors”:
• most organizations use following four broad categories of
compensable factors.
• 1.Skill needed to perform the job,
• 2. Effort required to complete the job,
• 3. Responsibility that goes with the expectation, and
• 4. Working Conditions under which jobs are performed
5. Prerequisites of Job evaluation
• A well designed and drafted form and questions
• Which jobs and employee have to be covered.
• One jobs should be compared with others
• The process should be properly communicated.
• Employees should be given proper training in
advance
• The methods should accept in open mind.
6. Job analysis
The procedure for determining the duties and
skills requirement of a job and the kind of person
who should be hired for it.
Job Description: a list of job’s duties, responsibilities,
reporting relationship ,working condition, and supervisory
responsibilities
Job specification: A list of job’s human requirements, that is
the requisite education, skills personalities etc.
7. Job
evaluation
Job Analysis
Process of obtaining job facts
JOB JOB
DESCRIPTIO SPECIFICATIO
N N
JOB RATING
Assigning relative score to each jobs
MONEY
ALLOCATION
JOB CLASSIFICATION
Grading of job according to
scale of pay
8. Objectives of job evaluation
• to find out the value of work, but this value which
varies from time to time and from place to place under
the influence of certain economic pressures
• to supply bases for wage negotiations founded on
facts rather than on any vague ideas.
• The technique of job evaluation can also be used to
determine not only what the job is worth but also the
value of each of the aspects such as the skill and
responsibility levels.
9. Compensable Factors
• There are two basic approaches to compare
several jobs.
• One is intuitively: just a formal way to decide that
one job is more important than another.
• Or one can compare jobs by focusing on certain
basic factors the jobs have in common.
• These factors are COMPENSABLE FACTORS.
• Eg. Skills, effort, responsibility and working
conditions.
11. Job Evaluation : Methods
• 4 fundamental JE methods:
1. Ranking – whole job is compared against other whole jobs on
some general notion of value / job content
2. Classification – concepts of value / work content are divided
into categories / classes & jobs are slotted into these categories
3. Factor comparison – content & value are broken down into
factors & jobs are evaluated by the degree of each factor the
job possesses.
4. Point plan – content and value are broken down into factors
and jobs and evaluated by the degree of each factor the job
possesses
12. • To Rank each job relative to all other jobs.
• Steps………………………………………
Ranking Method
Obtain Job information: by doing job analysis.
Select and grouping of jobs(factory jobs and clerical jobs).
Select compensable factors.(job difficulty), one is sufficient.
Ranking of jobs by each raters
Combine rating: usually several raters rank the job
independently than the rating committee can simply average
the rater’s ranking.
13. Job Evaluation : Ranking Method
• Rankings of jobs according to relative value
• Involves ordering of Job Descriptions from highest to lowest in value
• 2 ways of ranking usually considered
1. Alternation ranking
2. Paired comparison
• Disadvantages:
– Criteria / factors on which jobs are ranked are usually so crudely
defined that evaluations become subjective
– Evaluator(s) using this method must be knowledgeable about every
single job under study
– Number alone can make this task formidable (50 jobs will require 1225
paired comparison!!)
14. Job Evaluation : Alternation Ranking
Jobs Rank
• Ordering No. Title Most Valued
the job 1 Welder Tool maker
descriptions 2 Machine operator Welder
alternatively 3 Packer
at each
4 Grinder
extreme (all
5 Unit assembler
jobs are
6 Janitor
considered)
7 Tool maker
8 Spray painter Spray painter
• Eg. of
9 Engine operator Grinder
alternation
ranking 10 Inspector Packer
Least Valued
15. Job Evaluation : Paired Comparison
• Comparing all
possible pairs of
jobs Job Numbers
1 2 3 4 5 6 7 8 9
• No. of pairs to 1 A A B A B B A A
compare = 2 B
[n (n-1)] / 2 3 B A
4 A
• Eg. If you have 5 5 B
jobs then there are 6 A B
10 paired
7 A
comparisons
8 B
9 B
• Jobs with highest
total no. of “Most
Valuable” ranking A = Better B = Worse
becomes the
highest-ranked job.
16. A simple widely used method in which raters categorize jobs into groups,
all the jobs in each group are roughly the same value for pay purpose. The
group are either called classes if they contain similar jobs or grades if
contain jobs that are similar in difficulty or otherwise different
• Grouping jobs based on a set • A Job classification system
Job Classification
of rules for each group or like the class system,
class, such as amount of although grade contain
independent judgment, often dissimilar jobs such as
skill, physical effort. secretaries, mechanics and
• Classes usually contain fire fighter
similar jobs
17. Job Evaluation :
Classification/Grading Method
• Slotting Job Descriptions into a series of classes / grades
that cover the range of jobs
– Classes: a series of carefully labeled slots / pigeon holes
– Labels are the class descriptions that serve as the standard against
which the Job Descriptions are compared
• Steps:
1. Determine jobs / units to be included in study
2. Conduct Job Analysis / prepare Job Descriptions
3. Select evaluators
4. Define classes/selection of grades
5. Identify & slot benchmarks
6. Prepare classification manual
7. Apply system to non-benchmark jobs
18. Job Evaluation : Factor Comparison Method
• More sophisticated than the previous 2 methods, however, it‟s a
combination of ranking and point method
• All the jobs are compared to each other for the purpose of
determining their relative importance by selecting four /five
elements or factors which are common for all the jobs.
• the five imp factors are mental requirement, physical requirement,
responsibilities, working condition and skills requirement.
• Basic Steps:
1. Conduct Job Analysis and select job factors
2. Select benchmark jobs or key jobs
3. Rank benchmark jobs on each factor
4. Allocate benchmark wages across factors
5. Compare factor & wage allocation ranks
6. Conduct the job comparison scale
7. Applying the scale
19. What is a Benchmark Job?
• Benchmark jobs (also called key jobs) serve as a
reference points & must possess certain characteristics:
a. Content are well known & agreed upon by the parties involved
b. Contents change very little over time
c. Current pay rates are generally acceptable & differentials
among jobs relatively stable
d. Taken together, they contain the entire range of each
compensable factor
e. Accepted in the external labour market for setting wages
• 15 – 25, however number depends on range & diversity
of work to be evaluated
20. Point Method: a method in which no. of
compensable factors are identified and than the
degree to which each of these factors is present
on the job is determined
3 common characteristicss:
1. Identifying the Compensable factors each having several degrees
2. Factor degrees numerically scales: the degree to which each of these
factors is present in the job.(e.g let there are 5degree of “responsibility” a
job could be contain, further assume u assign different numbers of point
to each degree of each factor. Once the evaluation committee determine
the degree to which each compensable factors like “responsibility” and
“effort” is present in the job, it can calculate as total point value for the
job by adding up the corresponding points for each factor, that’s why it is
quantitative point rating.)
3. Weights reflecting relative importance of each factor
Steps in designing the point plan:
a. Conduct Job Analysis
b. Choose compensable factors
c. Establish factor scales
d. Derive factor weights
e. Prepare evaluation manual
f. Apply to benchmark jobs
21. Job Evaluation : Point Method
• Example – Characteristics of Point Job Evaluation method, Factors,
Scaled Degrees, Weights -
Weights Compensable Factors Degrees
(3) (1) (2)
40% Skills Required 1 2 3 4 5
30% Effort Required 1 2 3 4 5
20% Responsibility 1 2 3 4 5
10% Working Conditions 1 2 3 4 5
Here in this example, a Job „X‟‟s 240 total points may result from:
• 2 degrees of skills required = 2 X 40 = 80
• 3 degrees of effort required = 3 X 30 = 90
• 3 degrees of responsibility required = 3 X 20 = 60
• 1 degree of working conditions = 1 X 10 = 10
•
• TOTAL = 240
23. Major Decisions
• Major Steps:
1. Determine the pay level policy
2. Design, conduct, & analyze surveys
3. Update the data
4. Construct the policy lines
5. Design ranges, flat rates, & / or incentives
24. Determine Pay Level Policies
• 3 classes of pay level policies:
1. To lead
2. To meet
3. To follow competition
• Relative importance of pay level factors (ranked by
importance)
a. Rates paid by other employers in the industry or area
b. Union strength
c. Cost of living changes
d. Surplus / shortage of qualified workers
e. Employee unrest
f. Employer’s overall financial position
g. Firm’s profits
25. Determine Pay Level Policies
POLICY EFFECTS : What difference does the pay policy make?
1. PAY WITH COMPETITION
– Labour Costs = its Competitors (Market Rate)
2. LEAD POLICY
– Labour Costs > Market Rate
– Rationale is to maximize ability to attract & retain quality employees & to
minimize employee dissatisfaction with pay
– Some employers are able to pass higher pay rates on to consumers in form of
higher product prices
– Sometimes an entire industry can pass high pay rates on to consumers if pay is
relatively low proportion to total operating
3. LAG policy
– Labour Costs < Market Rate
– Lower pay levels probably contribute to turnover
26. Design & conduct surveys
WHAT INFORMATION TO COLLECT?
1. NATURE OF ORGANIZATION
– To assess similarities & differences among organizations in the
survey – include financial information, size, & organization structure
2. NATURE OF TOTAL PAY SYSTEM
– All the basic forms of pay included to assess similarities & differences
in the pay packages offered
– Sometimes benchmark benefit package to including only the most
expensive & variable benefits
3. INCUMBENT DATA
– Actual rates paid to incumbent which include total earnings, hours
worked, date, & amount of last increase, bonus, incentive, & so on
27. Design & conduct surveys
TYPES OF ANALYSIS?
• 2 components of the pay system
models are emerging
– An internally equitable job structure Constructing
based upon job analysis & job evaluation Pay Policy
has been developed – Internal Equity Lines
(horizontal axis)
– Key jobs from that structure were selected
& the rates paid for those jobs by
competitors in the external market have
been surveyed – purpose is to establish
external equity (vertical axis)
28. Construct Pay Policy Line
• ‘Quick’ analyses help check usefulness of survey data
• Construct market pay lines
• Updating survey data
• Set the employer’s pay policy line
– Note down the illustration
29. Design Pay Ranges
• Design pay ranges for jobs inside the organization
• Why bother with ranges?
– Wide variation of rates paid for similar jobs & skills reflects two
external pressures:
1. Existence of quality variations (skills, abilities, experience) among
individuals in the external market
2. Recognition of differences in the productivity-related value to employers
of these quality variations
– Ranges reflect the following org.al pressures:
1. Intention to recognize individual quality & performance variations with
pay
2. Intention to meet employees’ expectations that pay increases will occur
over time
30. Design Pay Ranges
• Construction of ranges
– Develop classes or grades
– Set midpoints, maximums, and minimums
– Degree of overlap
