What is a job evaluation?

Job evaluation is used to assess the relative worth of roles based on job information, such as job descriptions and required qualifications and competencies. Job evaluations are usually presented as ratings based on set criteria, helping you maintain a consistent pay band structure.

How is a job evaluation structured?

Job evaluation grading typically involves a hierarchy of job importance, using a data-driven approach. Through the process, human resources teams consider the type of skills, experience, knowledge and responsibilities required for the particular role title. Your team may need specific training or prior experience to ensure they remain neutral throughout the evaluation process.

What is the outcome of a job evaluation?

Ultimately, the objective of the exercise is to compare jobs and create a pay structure that is consistent for everyone in the business. Although the process is led by human resources, unions are often involved.

Because the process is complex, many businesses hire external consultants to ensure an unbiased, accurate assessment of each role’s value.

The pros and cons of job evaluation

Job evaluation often requires strong due diligence. A formal job evaluation scheme, clear guidance and ongoing support can help employers maintain a consistent approach to job evaluation. By doing so, you can gauge how to conduct this process depending on the specifics of your organisational structure.

Pros of job evaluation

• Forms a framework with a strong basis for pay justification
• Ensures an equitable pay structure throughout the business
• Helps to define clear salary ranges based on internal and external data
• Provides clarity on existing roles and functions in the business
• Provides a fair roadmap for promotions
• May form the basis of a benefits structure
• Increases pay transparency
• Positively impacts cost management

Challenges of job evaluation

• To comply with current fast-paced market changes, employers may have to evaluate jobs regularly, which can be costly
• Inexperienced HR professionals may make judgements based on personal bias
• As a process, it can require strong expertise and knowledge
• Managing employee emotions can be challenging, especially if the evaluation results in a pay downgrade.
• As with any organisational change, outcomes likely need to be communicated well to affected employees

Job evaluation techniques

The complexity of job evaluation can be addressed through various techniques. The way you approach this may depend on the type of organisation you run, the different job hierarchies you have and how many people you employ.

This section outlines some methods that you could use to conduct job evaluations effectively, depending on your business needs.

The classification method

The classification method examines pay internally, so it’s also known as the internal method. It focuses on qualitative insight and analysis into job characteristics, seniority levels, responsibilities and the skill set required.

Through these key performance indicators (KPIs), it creates a grading system that frames the hierarchical levels in the business. Job classification often involves grouping roles within each department and analysing factors such as skills, responsibilities and complexity to ensure fair and consistent evaluation. This method is straightforward but may be subjective, as it does not consider external market factors.

The competitive market pricing method

The market pricing method uses external market analysis. Unlike the internal method, it is based on quantitative data insights that measure the competitiveness of salaries that the business offers versus its competition. This method requires access to market data and, therefore, is often conducted by specialised consultancy firms.

The point-factor method

As its name suggests, this method uses a point system to evaluate jobs and determine compensation. It is a quantitative method that involves assigning points to different factors. You can then translate these points into compensation depending on their significance to your organisation. Examples of the factors you may assign points or a weighted value to are:

• Skills
• Working conditions
• Responsibilities
• Effort required

Employers using the point-factor method may break down each factor into smaller sub-factors. The total number of points allocated to a role forms the framework of the compensation package. This approach establishes a job’s ranking by evaluating individual jobs and the specific tasks they entail.

The ranking method

This method is qualitative and ranks jobs by hierarchy levels. This method ranks roles based on their perceived importance to the organisation’s success. This method involves ranking each position relative to others in the organisation. This method can be highly subjective as it typically does not involve assessing the responsibilities of each role within the hierarchy.

The factor comparison method

This method involves assigning different monetary values to factors such as skills and the effort required. This approach helps ensure equity by assessing each factor independently. While they may sound similar, the factor comparison method differs from the point factor method because it assigns a direct monetary value to each factor, rather than assigning points that represent compensation.

The above techniques require different levels of involvement and time investment. It may help you to balance your desired outcome against the investment of undertaking your chosen job evaluation method.

Guidance on conducting effective job evaluations

There are several different ways to approach job evaluation. To conduct this complex process, businesses may wish to follow some of the following key steps.

1. Clearly define the purpose of the job evaluation process

As with any analysis, begin with a clear definition of the scope of work. Having a clear purpose and desired outcome can help businesses and their human resources teams approach this task more effectively. The scope of the analysis usually defines the departments involved, the collaborators and whether the process is a job evaluation or re-evaluation.

2. Choose a method that fits the purpose and works for your business

Think about how your chosen method aligns with your desired outcome. You could then define your budget, timelines and consider the company size and the size of the scope for the evaluation.

You may consider your business’s access to external and internal data, since this can have an impact on the budget and timeline, particularly for external evaluation.

Managers are usually actively involved in the selection and implementation of the job evaluation method to ensure fairness, accuracy and organisational alignment.

3. Start the data collection process

For this analysis, data is often key. This data can be qualitative, quantitative or both. Gathering it and consolidating it is a large part of the job and strongly helps to ensure the accuracy of your analysis.

The data you collect could be current salaries, existing hierarchical structure, job grouping, job descriptions, levels of responsibility, market insight, location of the workforce, demography of the workforce and more, depending on the purpose of the job evaluation.

4. Conduct a pilot phase to troubleshoot the method

With most large or complex projects, it may be useful to launch an initial pilot phase. This allows for adjustments ahead of launching the evaluation and helps you identify issues with your process before the rollout.

Throughout this phase, it may help to keep flexibility in mind, as you may have to re-evaluate some factors or include additional data you have since deemed relevant. This step serves as a test on a small group of jobs.

5. Communicate with those involved

Your HR team is typically responsible for making sure employees are kept informed throughout the process. Job evaluation can emotionally impact your employees, particularly if some members of the team experience a pay rise or decrease. In some cases, job security may be at risk, so discussing the process with them in a transparent way may help make the situation easier.

Job evaluation may be complex and involve a great deal of work, but it is nonetheless useful if you want to address pay equity and transparency. You may benefit from conducting these evaluations on a regular basis and remaining objective throughout the process.