Job evaluation is the process of determining the relative importance of different job roles within a company and what the compensation for those roles should be. The aim of job evaluation is often to remove possible pay inequities—for example, if an employee is being paid significantly more or has better benefits than someone in a similar role.
Job evaluation is usually done through a combination of internal assessment of the roles in your company and external market research. It involves looking at how much each role gets paid, what the pay is for related positions, and what benefits are appropriate for each role. You might then compare your remuneration package to those of similar businesses in your area.
Job Evaluation Vs Performance Evaluation
A job evaluation assesses the job roles and remuneration packages within a company. For example, after a company restructuring, you might evaluate whether an office manager is being fairly compensated for their new management responsibilities. A performance evaluation, on the other hand, determines whether the employee in that position performs their duties well—for example, assessing whether or not a salesperson is hitting their sales targets.
Job evaluations are therefore usually concerned with the structure of the company as a whole. In contrast, performance evaluations are concerned with the achievements of individuals.
Why Perform Job Evaluations?
Regular job evaluations make employees feel valued, and they contribute to a strong company culture. More specifically, performing job evaluations can have the following benefits:
- Employee retention: 63% of employees cite a lack of promotional opportunities as either a major or minor reason for leaving their current roles. Performing regular job evaluations can prevent this by allowing employees to be recognized for any increases in responsibility or development of skills since the last evaluation. This, in turn, will lead to a higher employee retention rate for your company. The average cost of replacing an employee is estimated at 33% of an employee’s annual salary, so improving employee retention will ultimately increase your bottom line.
- Futureproofing: Futureproofing is the act of planning now for future changes to your business. By forecasting where you hope your business will be in a year or five years, you can use job evaluations to make sure you have the right people in your business to support your vision. Job evaluations can be used to adapt to new budgets, plan for growth, or even restructure if you plan on downsizing.
- Closing the gender pay gap: Large, established companies tend to have more discrepancies between male and female pay. 39% of employees state that pay inequality would be their main reason for leaving a role. However, by conducting regular, objective job evaluations, you can determine any inequities in pay and resolve them before they become issues.
When Should I Perform Job Evaluations?
There is no industry standard for how often you should perform job evaluations in your business. They can be time-consuming and costly, but to remain competitive you should perform job evaluations at least every few years. However, suppose there is a significant change to your business, or you notice a high staff turnover. In that case, it may be worth holding a job evaluation early to determine if pay and benefits are part of the reason.
Job Evaluation Methods
To get the most out of job evaluations we recommend considering carefully the method you will use. Make sure you establish what you’re trying to gain from the job evaluation before you decide on a framework.
Your evaluation method might follow an internal model, looking at how roles within your organization compare, perhaps using internal job comparisons or employee surveys. Alternatively, you might adopt an external model, using market research to determine relative pay across the industry.
You also have the option to use either quantitative or qualitative data. A quantitative approach is where you compare jobs by relative numerical data such as points on a scale. Qualitative data might include a role’s characteristics or qualities, such as its seniority level.
Point factor method
The point factor method is a quantitative method where the different compensable factors of a job, such as responsibilities, seniority, education, and skill level, are broken down and assigned points. If job A has more duties than job B, it would receive more points, be considered of higher importance to the business, and therefore receive more compensation.
This method is most useful when you want to make objective comparisons between roles.
Job ranking is a qualitative method where all jobs are placed in a hierarchy. The hierarchy is based on the complexity of the role and the value it brings to the company, based on the duties, responsibilities, and level of education it requires. This method suits small-scale evaluations or smaller companies with less than 100 employees, because a knowledge of the business as a whole is required.
This method is highly subjective, and it is easy to fall into the trap of evaluating the individual within a role and not the relative importance of the role itself. For example, you might have a talented person working in an associate’s position. Because of that, you might overestimate the importance of that role because the person in it is so highly skilled. Likewise, you might have a person in a senior position who isn’t achieving their job requirements, which might lead you to underestimate the importance of that role.
To avoid this confusion, try removing job titles from your comparison documents and look solely at the role’s competencies and responsibilities. This will help you disassociate the individual from the position. It might also be helpful to use job ranking in conjunction with other evaluation methods, to further mitigate any potential bias or favoritism.
Factor comparison method
Factor comparison combines the ranking method and the points method. Here, you are ranking the factors that affect compensation, as opposed to ranking the actual job. From this ranking, you can assign a monetary value to each factor to ensure that your staff are fairly paid for their responsibilities. For example, you may rank manager responsibilities higher than key-holder responsibilities, and therefore managers would receive more pay for those duties.
Once the jobs have been ranked, the next step is to compare the proposed pay to the local market value for similar roles. Note that an employee with fewer responsibilities should not be paid more than an employee with more responsibilities, regardless of the market rate. If they are, you may need to re-evaluate the individual’s grade or their responsibilities.
Using this method, you can ensure consistency across your organization, as employees will be fairly compensated regardless of what department they work in. For example, an HR administrator, an accounts administrator, a security guard, and a stock clerk would all likely rank equally within an organization as they all have similar levels of responsibility.
Factor comparison is considered an effective method for succession planning and restructuring, as it combines qualitative and quantitative evaluation and is therefore the fairest approach overall.
The job classification method is commonly used by established or public sector companies. It’s useful in cases where you need to justify your decision to stakeholders—for example, if your company is government-funded or uses taxpayers’ money.
In this method, the evaluator will write an objective job description for each role within the business. Using the job description, they will place each role into a grade category reflecting the complexity, the responsibilities involved, and the education and skills necessary to perform a job at that level.
For example, you may have an “Administrator” category, where all administrators, junior officers, or employees of that level sit, regardless of title. This category will have the least responsibilities across the business and, therefore, will be paid the least. Above them, you may have an “Officer” or “Junior Professional” category with slightly more responsibilities. Higher still in the hierarchy, you may have a “Professional” category; above them, you will have the “Manager” or “Senior Manager” grade.
There are likely to be people working within equivalent grade categories in several different departments—for example, finance, communications, and human resources might all be structured similarly. However, each job family will likely have its own specific grade classification system based on the department’s scope and responsibilities.
Market pricing is a useful method for big companies trying to position themselves competitively in the job market. It’s a quantitative, external evaluation method that compares your company’s pay scales and benefits to a comparable competitor’s.
If your competitor is a private-sector organization, the most common way of finding this information is through third-party pay evaluations. With a public-sector organization, you should be able to find pay scales on its website or in the annual published pay and benefits report.
While you should ensure you position yourselves competitively within the market, you don’t want to compete directly with other companies’ benefits packages. Your benefits package should be similar in value to your competitors but relevant to your organization. For example, if you’re a remote working company, it wouldn’t be advisable to offer company cars as a benefit, even if your competitors do.
How Do I Perform Job Evaluations?
Step 1: Determine the purpose and scale of the evaluation
No matter the scale, a good and productive job evaluation starts with planning.
You should start by determining the scale of your evaluation. Are you evaluating an individual role, a department, or the whole organization? Next, consider the purpose of the evaluation: are you adding benefits, changing salaries, or restructuring the organization? Answering these questions will help you determine what resources you should allocate to the evaluation, and who your key stakeholders will be.
Step 2: Select your method
You should select your method based on the answers to your questions in step 1. For example, if you’re trying to restructure a large organization then the factor comparison model may be most effective.
You should also consider any budgetary constraints you may have, the size of your company, and the timeline for completing this review. For example, suppose there is significant inequality in your pay structure. In that case, you will need to resolve this matter quickly before taking on any more employees.
Step 3: Compile all necessary data and information
You should prepare all the required information before you begin your evaluation. Depending on the scale of your project, you may need to compile some information from your human resources management system (HRM) or human resources information system (HRIS). You may need the following:
- Current salaries
- Job titles and descriptions
- Workforce demographics
- Current grade classification system or job family
You may also need information not readily available on your HRM or HRIS system, such as whether employees feel their remuneration is fair. Pay surveys should include a quantitative, numerical scale for the answers—for example, where 5 is very fair pay and 1 is very unfair pay.
Any surveys regarding a subjective matter should consist of closed questions (yes- or no-style questions) or a numerical scale. You need to be able to quantify the answers so that you can accurately interpret the data. Also bear in mind that open-ended, qualitative questions might lead to employees using the survey as an opportunity to vent about other issues, such as their relationship with their manager.
Step 4: Assemble your team
Once you have gathered the necessary information and have determined the parameters of your evaluation, you can assemble your team. Even if you’re conducting a small-scale project, it’s still advisable to have at least one other person evaluate with you. Being answerable to others will help you to avoid bias during a highly subjective process.
Step 5: Be prepared to re-assess
As you work through the project, you might find some ambiguity when selecting the most important aspects of the jobs. This is normal and to be expected. Don’t be afraid to question the methods of your team, reach out to managers to understand their views, or even change your method altogether. Most importantly, aim to remain fair and transparent with employees throughout the process.
Step 6: Update your stakeholders
Job evaluation can be difficult for employees. While you know that you are evaluating the role, not the person, the employees may not be able to separate themselves from the position they are in. For example, an office administrator might feel unappreciated if you don’t deem their role to be as valuable to the business as a senior manager.
It’s therefore important to have transparent conversations about the process with managers and to have a robust and documented process that employees and managers can refer to if necessary. Doing both will contribute to a culture of honesty within your organization. It will also help employees understand your decision-making after their role has been evaluated.
Once you’ve completed the evaluation process, you should update the relevant employees via letter within five working days of finishing your evaluation. They should sign the note acknowledging the change and return it to their manager or your HR department.
Job evaluation can be a time-consuming and emotionally taxing process. Worrying about whether you can remain objective or whether your decisions accurately reflect your workplace are challenges you’ll face during this process. It’s important to remember, however, that job evaluations are conducted to ensure a fair and consistent remuneration package for employees and development and promotion opportunities for all.