Chapter:

Job Evaluation

Definition Job Evaluation

A job evaluation is a systematic way of determining the value/worth of a job in relation to other
jobs in an organization. It tries to make a systematic comparison between jobs to assess their
relative worth for the purpose of establishing a rational pay structure.
Job Evaluation is the process of objectively determining the relative worth of jobs within an
organization. It involves a systematic study and analysis of job duties and requirements. Job
evaluation can measure the value of all jobs within an organization and produces a rank order
ranging from entry level positions to the most senior positions within an organization. It provides
a framework to administer pay.
An assessment of the relative worth of various jobs on the basis of a consistent set of job and
personal factors, such as qualifications and skills required.

Accounatble
for Resuls

Ability to
Solve the
Problem

Job
Evaluati
on

Technical
Knowledg
e

Management
Knowledge

Figure: Job Evaluation

The objective of job evaluation is to determine which jobs should get more pay than others.
Several methods such as job ranking, job grading, and factor comparison are employed in job
evaluation. Research indicates, however, that each method is nearly as accurate and reliable as
the other in ranking and pricing different jobs. Job evaluation forms the basis for wage and
salary negotiations.

Job Evaluation Process

Job evaluation needs to be differentiated from job analysis. Job analysis is a systematic way of
gathering information about a job. Every job evaluation method requires at least some basic job
analysis in order to provide factual information about the jobs concerned. Thus, job evaluation
begins with job analysis and ends at that point where the worth of a job is ascertained for
achieving pay equity between jobs.
Job evaluation is the process to determine the pay grade and exemption status for a job. A job
evaluation can be conducted to determine the level of a new job or an existing job. Job
evaluation is a step by step process which is completed after the successful completion of
following phases:

1. Job Analysis
It is a process through which required information about various aspects of jobs can be obtained.
Job analysis involves two dimensions:
i. Job description
Under job description, a profile of job information is prepared indicating the duties,
responsibilities and working condition of work. It explains about what the job entails.
ii. Job specification
Job specification indicates preparation of a specification statement which explains the necessary
skills, knowledge and abilities required to perform the job.

2. Job Rating
Job rating includes the process of using same methods to study job descriptions and
specifications in order to assign a relative worth for each job. Some of job rating methods are:
ranking, point rating factor comparison, and so on.

3. Money Allocation
After rating the worthiness of each job, a pay structure is determined and the money for each job
is allocated. It means, it is the arrangement of paying rewards/compensation for each job
according to its worth or value.

4. Job Classification
Job classification is the last step of job evaluation which is concerned with the categorization of
jobs according to their pay scale. For example, high paying jobs are represented at the top of the
hierarchy.

Job evaluation

Job Analysis

Job description

Job specification

Job Rating

Money Allocation

Job Classification

Figure: Job Evaluation Process

Methods of Job Evaluation

There are four basic methods of job evaluation currently in use which are grouped into two
categories:
1. Non-quantitative Methods:

2. Quantitative Methods:

(a) Point Rating

(a) Ranking or Job Comparison

(b) Grading or Job Classification

(b) Factor Comparison

The basic difference between these two methods lies in the sense that, under non-quantitative
methods, a job is compared as a whole with other jobs in the organization, whereas in case of
quantitative methods, the key factors of a job are selected and, then, measured. The four methods
of job evaluation are now discussed one by one.

1. Ranking Method
The ranking method is the simplest form of job evaluation. In this method, each job as a whole is
compared with other and this comparison of jobs goes on until all the jobs have been evaluated
and ranked. All jobs are ranked in the order of their importance from the simplest to the hardest
or from the highest to the lowest. The importance of order of job is judged in terms of duties,

responsibilities and demands on the job holder. The jobs are ranked according to the whole job
rather than a number of compensable factors. The ranking of jobs in a University, based on
Ranking Method, may be like this:
Ranking of University Jobs:
Ranking Order
Pay Scale
Professor/Registrar
Rs. 16,40(M50-20,900-500Reader/Dy. Registrar
22,400
Lecturer/Asst.
Rs. 12,000-420-18,300
Registrar
Rs. 8,000-275-13,500
The application of the Ranking Method involves the following procedure:
(i)

Symbol Ranking: Analyze and describe jobs, bringing out those aspects which are to
be used for purpose of job comparison.

(ii)

Paired Ranking: Identify bench-mark jobs (10 to 20 jobs, which include all major
departments and functions). The jobs may be the most and least important jobs, a job
midway between the two extremes, and others at the higher or lower intermediate
points.

(iii)

Alteration Ranking: Rank all jobs in the organization around the bench-mark jobs
until all jobs are placed in their rank order of importance.

(iv)

Classification Ranking: Divide all the ranked jobs into appropriate groups or
classifications by considering the common features of jobs such as similar duties,
skills or training requirements. All the jobs within a particular group or classification
receive the same wage or range of rates.

Ranking method is appropriate for small-size organizations where jobs are simple and few. It is
also suitable for evaluating managerial jobs wherein job contents cannot be measured in
quantitative terms. Ranking method being simple one can be used in the initial stages of job
evaluation in an organization.

2. Grading Method
Grading method is also known as classification method. This method of job evaluation was
made popular by the U.S. Civil Service Commission. Under this method, job grades or classes
are established by an authorized body or committee appointed for this purpose. A job grade is
defined as a group of different jobs of similar difficulty or requiring similar skills to perform
them. Job grades are determined on the basis of information derived from job analysis.

The grades or classes are created by identifying some common denominator such as skills,
knowledge and responsibilities. The example of job grades may include, depending on the type
of jobs the organization offers, skilled, unskilled, account clerk, clerk-cum-typist, steno typist,
office superintendent, laboratory assistant and so on.
Once the grades are established, each job is then placed into its appropriate grade or class
depending on how well its characteristics fit in a grade. In this way, a series of job grades is
created. Then, different wage/salary rate is fixed for each grade.

3. Points Rating
This is the most widely used method of job evaluation. Under this method, jobs are broke down
based on various identifiable factors such as skill, effort, training, knowledge, hazards,
responsibility, etc. Thereafter, points are allocated to each of these factors.
Weights are given to factors depending on their importance to perform the job. Points so
allocated to various factors of a job are then summed. Then, the jobs with similar total of points
are placed in similar pay grades. The sum of points gives an index of the relative significance of
the jobs that are rated.
The procedure involved in determining job points is as follows:
(i) Select Benchmark Job: Determine the jobs to be evaluated. Jobs should cover all the
major occupational and levels of responsibility to be covered by the method.
(ii) Choose Compensable Factors: Decide on the factors to be used in analyzing and
evaluating the jobs. The number of factors needs to be restricted because too many
factors result in an over-complex scheme with overlap and duplication between factors.
(iii)

Define the Degree of Factors: Determine degrees of each factor and assign point
value to each degree.

(iv) Determine the Weigh of Each Factors: Define the factors clearly in written. This is
necessary to ensure that different job raters interpret a particular factor in the same sense.
(v) Determine Point values: Point values are assigned to different degrees on the basis of
arithmetic progression.
(vi)Verify Factor Degree & Point Value: money values are assigned to points. For this
purpose, points are added to give the total value of a job. Its value is then translated into
money terms with a predetermined formula & Evaluation of each job.

4. Factor Comparison Method

This method is a combination of both ranking and point methods in the sense that it rates jobs by
comparing them and makes analysis by breaking jobs into compensable factors. This system is
usually used to evaluate white collar, professional and managerial positions.
The mechanism for evaluating jobs under this method involves the following steps:
(i). First of all, the key or benchmark jobs are selected as standards. The key jobs selected should
have standards contents, well accepted pay rates in the community, and should consist of a
representative cross-section of all jobs that are being evaluated-from the lowest to the highest
paid job, from the most important to the least importantand cover the full range of
requirements of each factor, as agreed upon by a Committee representing workers and
management.
(ii). The factors common to all jobs are identified, selected and defined precisely. The common
factors to all jobs are usually five, viz., mental requirements, physical requirements, skill
requirements, working conditions and responsibility.
(iii). Once the key jobs are identified and also the common factors are chosen, the key jobs are,
then, ranked in terms of the selected common factors.
(iv). The next step is to determine a fair and equitable base rate (usually expressed on an hourly
basis) and, then, allocate this base rate among the five common factors as mentioned earlier.

Merits and Demerits of the four Methods

Methods

Merits

Demerits

1. Ranking
Method

2. Grading
Method

3. Points
Rating

1. It is the simplest method.

2. It is quite economical to put it
into effect.
3. It is less time consuming and
4. It involves little paper work.

1. The main demerit of the ranking

method is that there are no definite
standards of judgment and also there
is no way of measuring the
differences between jobs.
2. It suffers from its sheer
unmanageability when there are a
large number of jobs.

1. This method is easy to

understand and simple to
operate.
2. It is economical and,
therefore, suitable for small
organizations.
3. The grouping of jobs into
classifications makes pay
determination problems easy to
administer.
4. This method is useful for
Government jobs.

1. The method suffers from personal

bias of the committee members.
2. It cannot deal with complex jobs
which will not fit neatly into one
grade.
3. This method is rarely used in an
industry.

1. It is the most comprehensive

and accurate method of job
evaluation.
2. Prejudice and human
judgment are minimized, i.e. the
system cannot be easily
manipulated.
3. Being the systematic method,
workers of the organization

1. It is both time-consuming and

expensive method.
2. It is difficult to understand for an
average worker.
3. A lot of clerical work is involved
in recording rating scales.
4. It is not suitable for managerial
jobs wherein the work content is not
measurable in quantitative terms.

favor this method.

4. The scales developed in this
method can be used for long
time.
5. Jobs can be easily placed in
distinct categories.

4. Factor
Comparison
Method

1. It is more objective method of

job evaluation.
2. The method is flexible as
there is no upper limit on the
rating of a factor.
3. It is fairly easy method to
explain to employees.
4. The use of limited number of
factors (usually five) ensures less
chances of overlapping and overweighting of factors.
5. It facilitates determining the
relative worth of different jobs.

1. It is expensive and timeconsuming method.

2. Using the same five factors for
evaluating jobs may not always be
appropriate because jobs differ
across and within organisations.
3. It is difficult to understand and
operate.

Problems of Job Evaluation

The problems of job evaluation are summarized as under:
(1) Not a scientific techniqueJob evaluation is a systematic technique and not the scientific
technique of rewarding the job. Job evaluation lacks scientific precision because all factors
cannot be measured accurately.
(2) Problem of adjustmentThough many ways of applying the job evaluation techniques are
available rapid changes in technology and in the supply and demand of particular spills have
given rise to problems of adjustment.
(3) UnrealisticSubstantial differences exist between job factors and the factors emphasized in
the market. These differences are wider in cases in which the average pay offered by a company
is lower than that prevalent in other companies in the same industry or in the same geographical
area.

(4) Organizational LimitationsA job evaluation scheme takes a long time to install. It
requires specialized personnel and it is costly.
(5) Opposition by workersSome of the methods of job evaluation are not easily understood
by workers. Workers fear that job evaluation will do away with collective bargaining.
(6) SubjectiveToo many factors are used in job evaluation and moreover there is no standard
list of factors to be considered. Definitions of factors vary from organization to organization.
Many researches show that the factors used are not independently be valued at all. It gives more
reliance on internal standards and evaluation for fixing wage rates.
(7) Issue in allowance Job evaluation leads to issue in allowance allocation as no allowance is
made for differences shown in performing certain jobs.

(8) Inaccurate Assessment Assessment in job evaluation is usually inaccurate. This is one of
the major weaknesses in job evaluation. Again, if number of jobs is graded small, jobs of a
different character may be merged together in the same rate.
(9) Variations Job evaluation is a problem because it introduced variations away from the
normal basic system. Since the advent of job evaluation has been extended to include white
collar jobs, workers in this group have been very critical and they have been compelled a
recognition of the fact that all the job ratings are essentially subjective.
(10) Opposition from Trade Union There is small opposition from trade union on the
existence of job evaluation, notwithstanding that the union does not regard it as removing the
need for negotiation of wages and salaries of workers and it is made on certain principles and
results are generally ignored.
In spite of these problems, job evaluation is very useful in evaluating the relative worth of the
job. Job evaluation provides a systematic study and assessment of the job and many complaints
about disparity in existing wage structures are removed by this technique. It is a technique which
can help avoid several anomalies in wages that causes so much heart burns and disgust today
provided it is used sensibly and is not pressed beyond its proper limits. While using this
technique, its limitations should also be considered.

COMPONENTS OF REMUNERATION
An average employee in the organised sector is entitled to several

benefits both financial as well as non-financial. To he specific,

typical remuneration of an employee compriseswages and salary,
incentives, fringe benefits, perquisites, and non-monetary benefits.
WAGES AND SALARY
Wages represent hourly rates of pay, and salary refers to the
monthly rate of pay, irrespective of the number of hours put in by an
employee. Wages and salaries are subject to annual increments.
They differ from employee to employee, and depend upon the
nature of job, seniority, and merit.
Incentives
Also called 'payments by results', incentives are paid in addition to
wages and salaries. Incentives depend upon productivity, sales,
profit, or cost reduction efforts.
There are:
1) individual incentive schemes and
2) group incentive programmes.
Individual incentives are applicable to specific employee
performance. Where a given task demands group effort for
completion, incentives are paid to the group as a whole. The amount
is later divided among group members on an equitable basis.
Fringe Benefits
These include such employee benefits as provident fund, gratuity,
medical care, hospitalisation, accident relief, health and group
insurance, canteen, uniform, recreation and me like.
Perquisites
These are allowed to executives and include company car, club
membership, paid holidays, furnished house, stock option schemes
and the like- Perquisites are offered to retain competent executives.

Non-monetary Benefits
These include challenging job responsibilities, recognition of merit,
growth
prospects, competent supervision, comfortable working conditions,
job sharing, and flexitime.
FACTORS INFLUENCING EMPLOYEE REMUNERATION

A number of factors influence the remuneration payable to

employees. They can be categorized into:
1) External and
2) Internal factors.
EXTERNAL FACTORS - Factors external to an organisation are labour
market, cost of living, labor unions, government legislations, the
society, and the economy'.
Labour Market: Demand for and supply of labor influence wage and
salary fixation. A low wage may he fixed when the supply of labour
exceeds the demand for it.
A higher wage will have to he paid when he demand exceeds
supply, as in the case of skilled labour. A paradoxical situation is
prevailing in our countryexcessive unemployment is being
juxtaposed with shortage of labour. While unskilled labour is
available in plenty, there is a shortage of technicians, computer
specialists and professional managers. High remuneration to skilled
labour is necessary to attract and retain it. But exploitation of
unskilled labour, like, for instance, paying niggardly wages because
it is available in plenty, is unjustifiable.

Going rate of pay is another labour-related factor influencing

employee remuneration. Going rates are those that are paid by

different units of an industry in a locality and by comparable units of
the same industry located elsewhere. This is the only way of fixing
salary and wage in the initial stages of plant operations.
Subsequently, a comparison of going rates would be highly useful in
resolving wage-related disputes.

However, the argument that productively would increase if it is

linked to remuneration is hardly acceptable to labour and labour
organisations.
Cost of Living: Next in importance to labour market is the cost of
living.
This criterion matters during periods of rising prices, and is forgotten
when prices are stable or falling. The justification for cost of living as
a criterion for wage fixation is that the real wages of workers should
not be allowed to be whittled down by price increases- A rise in the
cost of living is sought to be compensated by payment of dearness
allowance, basic pay to remain undisturbed. Many companies
include an escalatory clause in their wage agreements in terms of
which dearness allowance increases or decreases depending upon
the movement of consumer price index (CPI).
Labour Unions: The presence or absence of labor organizations often
determine the quantum of wages paid ID employees. Employers in
non-unionized factories enjoy the freedom to fix wages and salaries
as they please.
Because of large-scale unemployment, these employers hire
workers at little or even less than legal minimum wages. An
individual non-unionized company may be willing to pay more to its
employees if only to discourage them from forming one, but will
buckle under the combined pressure from the other non-unionized

organizations. The employees of strongly unionized companies to

have no freedom in wage and salary fixation. They are forced to
yield to the pressure of labour representatives in determining and
revising pay scales.
Society: Remuneration paid to employees is reflected in the prices
fixed by an organisation for its goods and services. For this reason,
the consuming public is interested in remuneration decisions.
Though the financial position of the employer and the state of the
national economies have their say in the matter of wage fixation,
"the requirements of a workman living in a civilized and progressive
society also came to be recognized." According to the Supreme
Court, the social philosophy of the
period provides the background for decisions on industrial disputes
relating to the wage structure.

The Economy: The last external factor that has its impact on wage
and salary fixation is the state of the economy. While it is possible
for some
organisations to thrive in a recession, there is no question that the
economy affects remuneration decisions. For example, a depressed
economy will probably increase the labour supply. This, in turn,
should serve to lower the going wage rate.
In most cases, the cost of living will rise in an expanding economy.
Since the cost of living is commonly used as a pay standard, the
economy's health exerts a major impact upon pay decisions. Labour
unions, the government, and the society are all less likely to press
for pay increases in a depressed economy.