JOB EVALUATION

Manoj Mathew, RSOM

Job Evaluation
Job Evaluation
The systematic process of determining the
relative worth of jobs in order to establish
which jobs should be paid more than others
within an organization.

Manoj Mathew, RSOM

Different Job Evaluation Systems

SCOPE OF COMPARISON
BASIS FOR
COMPARISON

Job vs. job

Job vs. scale

JOB AS
A WHOLE

JOB PARTS
OR FACTORS

(NONQUANTITATIVE)

(QUANTITATIVE)

Job ranking
system

Factor comparison
system

Job classification
system

Point
system

Manoj Mathew, RSOM

Job Evaluation Systems

Job Ranking System
Oldest system of job evaluation by which jobs
are arrayed on the basis of their relative worth.
Disadvantages
Does not provide a precise measure of each jobs
worth.
Final job rankings indicate the relative importance
of jobs, not extent of differences between jobs.
Method can used to consider only a reasonably
small number of jobs.
Manoj Mathew, RSOM

Paired-Comparison Job Ranking

Table

Directions: Place an X in the cell where the value of a row job is higher than that of a column job.

Manoj Mathew, RSOM

Job Evaluation Systems

Job Classification system
A system of job evaluation in which jobs are
classified and grouped according to a series of
predetermined wage grades.
Successive grades require increasing amounts
of job responsibility, skill, knowledge, ability, or
other factors selected to compare jobs.

Manoj Mathew, RSOM

Point System
Point System
A quantitative job evaluation procedure that determines
the relative value of a job by the total points assigned to
it.
Permits jobs to be evaluated quantitatively on the basis
of factors or elementscompensable factorsthat
constitute the job.

Point Manual
A handbook that contains a description of the
compensable factors and the degrees to which these
factors may exist within the jobs.

Manoj Mathew, RSOM

Point Values for Job Factors

of The American Association of Industrial Management
FACTORS

1ST
2ND
3RD
4TH
5TH
DEGREE DEGREE DEGREE DEGREE DEGREE

Skill
1. Education
2. Experience
3. Initiative and ingenuity

14
22
14

28
44
28

42
66
42

56
88
56

70
110
70

10
5

20
10

30
15

40
20

50
25

5
5
5
5

10
10
10
10

15
15
15
15

20
20
20
20

25
25
25
25

10
5

20
10

30
15

40
20

50
25

Effort
4. Physical demand
5. Mental or visual demand

Responsibility
6. Equipment or process
7. Material or product
8. Safety of others
9. Work of others

Job Conditions
10. Working conditions
11. Hazards

Manoj Mathew, RSOM

Factor Comparison System

Factor Comparison System
A job evaluation system that permits the
evaluation process to be accomplished on a
factor-by-factor basis by developing a factor
comparison scale.
The compensable factors of a job evaluated
are compared against the compensable
factors of key jobs within the organization that
serve as the job evaluation scale.
Manoj Mathew, RSOM

Characteristics of Key Jobs

Key Jobs
Jobs that are important for wage-setting purposes
and are widely known in the labor market.

Characteristics of Key Jobs

They are important to employees and the
organization.
They vary in terms of job requirements.
They have relatively stable job content.
They are used in salary surveys for wage
determination.
Manoj Mathew, RSOM

Job Evaluation for Management

Positions
Hay Profile Method
Job evaluation technique using three factors
knowledge, mental activity, and accountability
to evaluate executive and managerial
positions.

Manoj Mathew, RSOM

The Compensation Structure

Wage and Salary survey
A survey of the wages paid to employees of
other employers in the surveying
organizations relevant labor market.
Helps maintain internal and external pay equity
for employees.

Manoj Mathew, RSOM

Compensation
Pay is a statement of an employees
worth by an employer.
Pay is a perception of worth by an
employee.

Manoj Mathew, RSOM

Total Compensation
The package of quantifiable
rewards an employee receives for
his or her labours. Includes three
components: base compensation,
pay incentives, and indirect
compensation/benefits
Manoj Mathew, RSOM

Important Compensation Related

Acts in India
Minimum Wages Act, 1948
Payment of Wages Act, 1936
Equal Remuneration Act, 1976
Companies Act, 1956

Total
Total Compensation
Compensation
Direct
Direct

Indirect
Indirect

Wages
Wages//Salaries
Salaries

Time
TimeNot
NotWorked
Worked
Vacations
Vacations
Breaks
Breaks
Holidays
Holidays

Commissions
Commissions

Insurance
InsurancePlans
Plans
Medical
Medical
Dental
Dental
Life
Life

Bonuses
Bonuses
Gainsharing
Gainsharing

Security
SecurityPlans
Plans
Pensions
Pensions

Employee
EmployeeServices
Services

Educational
Educationalassistance
assistance
Recreational
programs
Recreational programs
Manoj Mathew, RSOM

Common Strategic Compensation

Goals
To reward employees past performance
To remain competitive in the labor market
To maintain salary equity among employees
To mesh employees future performance with
organizational goals
To control the compensation budget
To attract new employees
To reduce unnecessary turnover
Manoj Mathew, RSOM

Equity and Its Impact on

Pay Rates
Forms of Equity

External
Equity

Internal
Equity

Individual
Equity

Procedural
Equity

Relationship between Pay Equity

and Motivation

The greater the perceived disparity between my input/output ratio and

the comparison persons input/output ratio, the greater my motivation
to reduce the inequity.
Manoj Mathew, RSOM

Components of the Wage Mix

Labor Market
Conditions

Compensation Strategy
of the Organization

Area Wage
Rates
Cost of
Living

Worth of
the Job

WAGE
MIX

Collective
Bargaining

Employees
Relative
Worth
Employers
Ability
to Pay

Legal
Requirements
Manoj Mathew, RSOM

Factors Affecting the Wage Mix

Manoj Mathew, RSOM

The Key Steps in Creating Compensation

Plans
Job Evaluation for
Internal Equity

1. Job Analysis

2. Job Descriptions
Identify
Compensable Factors

3. Job Specifications
4. Rate Worth of All Jobs
Using a Predetermined
System
5. Job Hierarchy

Market Surveys for

External Equity
Within-Pay-Range
Positioning Criteria
for Individual Equity

6. Classify Jobs by
Grade Levels

1. Check Market Value

Using Benchmark or Key
Jobs

7. Establish Final Pay

Policy

Criteria for Pay

Positioning Within
Range for Each Job
Experience
Seniority
Performance
1998 by Prentice Hall

Manoj Mathew,
Individual
Pay RSOM
Assignment

Pay for Performance Systems /

Incentive Systems
Pay-for-performance systems, also called incentive
systems, reward employee performance on the basis of
three assumptions:
Individual employees and work teams differ in how much
they contribute to the firmnot only in what they do, but
also in how well they do it.
The firms overall performance depends to a large degree on
the performance of individuals and groups within the firm.
To attract, retain, and motivate high performers and to be
fair to all employees, a company needs to reward employees
on the basis of their relative performance.

Manoj Mathew, RSOM

Pay-for-Performance Programs
Unit of Analysis
Microlevel
Individual
Team

Macrolevel
Business Unit/Plant
Organization

Merit pay

Bonuses

Gainsharing

Profit sharing

Bonuses

Awards

Bonuses

Stock plans

Awards

Awards

Piece rate

Manoj Mathew, RSOM

Gainsharing is a plant wide incentive plan

in which a portion of the companys cost
savings is returned to workers, usually in the
form of a lump-sum bonus.

Profit sharing is a corporate wide incentive

plan that uses a formula to allocate a portion
of declared profits to employees.
Manoj Mathew, RSOM

Key Strategic Pay Policy Questions in the Design

of Executive Long-Term Income Programs
1. How long should the time horizon be for dispensing
rewards?
2. Should length of service be considered in determining the
amount of the awards?
3. Should the executive be asked to share part of the costs and,
therefore, increase his or her personal risk?
4. What criteria should be used to trigger the award?
5. Should there be a limit on how much executives can earn or
a formula to prevent large unexpected gains?
6. How often should the awards be provided?
7. How easy should it be for the executive to convert the award
into cash?

Manoj Mathew, RSOM

Advantages of Individual-Based Payfor-Performance Plans

Performance that is rewarded is likely to be
repeated.
Individuals are goal-oriented and financial
incentives can shape an individuals goals
over time.
Assessing the performance of each
employee individually helps the firm achieve
individual equity.
Individual-based plans fit in with an
individualistic culture.
Manoj Mathew, RSOM

Disadvantages
Tying pay to goals may promote singemindedness.
Many employees do not believe that pay
and performance are linked.
Individual pay plans may work against
achieving quality goals.
Individual-based programs promote
inflexibility in some organizations.
Manoj Mathew, RSOM

Conditions Under Which Individual-Based

Plans Are Most Likely to Succeed
When the contributions of individual employees
can be accurately isolated.
When the job demands autonomy.
When cooperation is less critical to successful
performance or when competition is to be
encouraged.
They foster group cohesiveness.
They aid performance measurement.
Manoj Mathew, RSOM

Advantages of Team-Based Payfor-Performance Plans

They foster group cohesiveness.
They aid performance
measurement.

Manoj Mathew, RSOM

Disadvantages of Team-Based
Pay-for-Performance Plans
Possible lack of fit with individualistic
cultural values.
The free-riding effect.
Social pressures to limit performance.
Difficulties in identifying meaningful
groups.
Intergroup competition leading to a
decline in overall performance.
Manoj Mathew, RSOM

Report of the Committee on Fair

Wages
Minimum wage the wage which must
provide not only for the bare sustenance
of life, but for the preservation of the
efficiency of the worker. For this purpose
the minimum wage must provide for some
measure of education, medical
reimbursements and amenities

Manoj Mathew, RSOM

Living wage
Living wage is one which should enable
the earner to provide for himself and his
family not only the bare essentials of food,
clothing and shelter but a measure of
frugal comfort, including education for his
children, protection against ill health,
requirements of essential social needs and
a measure of insurance against the more
important misfortunes, including old age.
Manoj Mathew, RSOM

Fair wage
It is the wage which is above the minimum
wage but below the living wage..

Manoj Mathew, RSOM

The Nine Criteria for Developing a

Compensation Plan
1. Internal versus External Equity
2. Fixed versus Variable Pay
3. Performance versus Membership
4. Job versus Individual Pay
5. Egalitarianism versus Elitism
6. Below-Market versus Above-Market Compensation
7. Monetary versus Nonmonetary Awards
8. Open versus Secret Pay
9. Centralization versus Decentralization of Pay Decisions
Manoj Mathew, RSOM