SLM - Unit 04 PDF

Compensation and Benefits Unit 4
Unit 4 Job Evaluation
Structure:
4.1 Introduction
Objectives
4.2 Compensation Strategy at Micro Level
4.3 Concept of Equity
Internal equity
External equity
4.4 Job Evaluation
Methods of job evaluation
System of job evaluation
4.5 Process of Job Evaluation
4.6 Problems Involved in Job Evaluation
4.7 Summary
4.8 Glossary
4.9 Terminal Questions
4.10 Answers
4.11 Case Study
4.1 Introduction
In the previous unit, you have studied the concept of wage and salary
administration at national level with respect to wage boards, its policy, pay
commissions and collective bargaining.
In any organisation, HR practices and compensation policy plays a very
crucial role in order to ensure cost effectiveness. It provides guidance to
organisations regarding hiring talents, retaining and maintaining them as
well as helping the organisation to design, plan and implement the
strategies related to compensation management.
Thus, every organisation has to develop its compensation policy by keeping
in mind the interest of employees, society, management and customers and
must identify and assess it from time to time.
In this unit, you will know about the micro concept of compensation and its
strategies that help the organisations to achieve their objectives. You will
also learn about the concept of equity and job evaluation as well as its
Sikkim Manipal University B1859 Page No.: 78

methods, procedures and the problems that are involved in evaluating the
jobs.
Objectives:
After studying this unit, you should be able to:
• discuss the compensation strategy at micro level
• explain the concept of equity at both internal and external level
• define the methods and systems of job evaluation
• describe the process of job evaluation
• list the problems involved in job evaluation
4.2 Compensation Strategy at Micro Level

The compensation strategy, which you studied in the previous unit, was at
macro level. Compensation strategy at industry or micro level is a bit
different and is based on three building blocks, which are developed based
on compensation model which is explained in the following figure 4.1.
STRATEGIC STRATEGIC
ISSUES TECHNIQUES
OBJECTIVES
CONSISTENCY Work Descriptions Evaluation INTERNAL

analysis certification STRUCTURE
EFFICIENCY
Performance
Quality
Customer cost
COMPETITIVENESS Market Surveys Policy PAY
definition lines STRUCTURE
EQUITY
CONTRIBUTORS Seniority Performance- Variable INCENTIVE

based based Pay PROGRAMMES
COMPLIANCE
LAW & ADMINISTRATION Planning Budgeting Communication EVALUATION
Source: Compensation Management, 1st Edition, B.D. Singh, Excel Books

Figure 4.1: Compensation Model

According to the figure, the three building blocks of compensation model

are:
1. Objectives of compensation
2. Strategic policies/issues of compensation
3. Compensation techniques
Let’s discuss each in detail now.
1. Objectives of compensation: In order to achieve goals of the
organisation, the compensation system is managed and designed with
certain rules and regulations which comprise of the following objectives:
To reward employees’ past performance fairly, in terms of efforts,
skills and competencies
To attract and retain competitive high performing employees
To motivate the high performing employees and reinforce desirable
employee behaviour.
To remain competitive in the labour market.
To align employees’ future performance with organisational goals
To communicate the employees their worth to the organisation
To provide employee social status.
2. Strategic policies/issues of compensation: The strategic policies/

issues of compensation are as follows:
Pay for performance
Pay for seniority
Salary increases and promotions
Overtime and shift pay
Probationary pay
Paid and unpaid leaves
Paid holidays
Salary compression (A salary inequity problem, generally caused by
inflation, resulting in longer-term employees in a position earning
less than workers entering the firm today)
Geographic costs of living differences
3. Compensation techniques: There are different methods/techniques of

compensation as follows:
Performance bonuses: Companies, which are in the process of
paying their employees by way of hourly wages and fixed salaries
frequently reward good work in the form of bonuses. As employees

are inclined to work longer and harder to attain bonuses, this
scheme is quite beneficial. Bonuses are a way of showing your
appreciation to your employees’ hard work and giving them
recognition. This also shows your thoughtfulness and care towards
them.
Robust benefits: Most of the companies offer benefits like employer
contributions to a particular plan and health insurance. However,
such plans can be tremendously costly for the company. On the
contrary, there are a wide range of other benefits which help in
increasing the attractiveness of the whole compensation plan while
costing very little.
Example: Tuition reimbursement allows employees furthering their
educations to get back some of what they spend on tuition.
Work/life balance: Flexible working hours or the work from home
options are quite convenient for the employees and are highly
appreciated by them. These plans hardly cost you anything. But they
are really valuable for employees who give importance to time for life
more than cold hard cash.
Example: An employee who earns a modest salary may appreciate
having the freedom to leave work and attend his child’s function and
make up for the time later.
Professional development: Professional development is of great
importance for employees as it equips them with the much needed
skills for career growth. If you highlight professional development
opportunities in your employee compensation packages, it will be
helpful in attracting and retaining employees. You also need to make
them familiar of the advantages of this compensation and how it will
help them in moving up the career ladder.
These are just a few compensation techniques, there may be many such
techniques which are selected and tailored according to the company’s
specific needs.

Case Let
Discrimination Sued
In one of the NGOs, both male and female workers were employed on the
basis of a similar job description but women who got the lesser payment
sued the NGO. They appealed to get equal payment when they were
employed according to the same job description. The NGO protested that
their (female) productivity was less and therefore they had been paid less.
These men and women were hired as managers and assistant managers.
Both signed the agreement for productivity-linked payments. When
payment was made, the women realised that they were paid lesser than
the male managers. The owner’s contention was that the work assigned
was simpler to the women and slightly more difficult for the male
executives. Therefore, the target for women was higher. Since the female
executives achieved fewer targets they were paid less.
According to the Equal Compensation Act, both are to be paid equally if
the job description is the same. But the apparent discrimination was that
the targets were different because the nature of the work was different.
However, this was not explained before fixing the compensation.
Source: Compensation Management, 1st Edition, Er Soni Shyam Singh, Excel
Books
Self Assessment Questions

1. Out of the following which one is not related to the building blocks of
the compensation model:
(a) Job Evaluation
(b) Compensation techniques
(c) Compensation goals
(d) Strategic policies of compensation
2. To align employees’ future performance with organisational goals is an
objective of compensation. (True/False)
3. Employees give value to _______________ because it gives them the
skills needed to move up the career ladder.

4.3 Concept of Equity

In general, equity is related to equal payment for equal work, that is, there
should be fairness to achieve a successful system of compensation. Equity
is regarded as a very important factor that affects the valence (the degree to
which an individual values a particular reward he or she receives) of
rewards.
The perception of employees related to equity and inequity is very crucial
when an organisation sets its goals. Thus, employees are motivated to
support the organisation’s objectives as well as perform much better when
equitable fairness of pay is given to them. Therefore, while deciding equity
in compensation, organisations should take into consideration the following
factors:
• Financial resources, that is, ability and capacity of the organisation to
pay to its employees.
• Image building, that is, desire to compensate for building a reputation.
• Labour market, that is, need to compensate as per the equity which
employees perceived.
Now you will be able to understand this concept of equity with the help of
the following example.
Example: A person working in company X is paid $20,000 similar to a
person of the same gender sitting nearby for exactly the same job.
You must know that equity is of the following types:
4.3.1 Internal equity
It refers to the equal pay for the same kinds of jobs in the organisation as
employees perceive that they are fairly rewarded and compensated as per
their job value in their firm. It, thus, identifies whether there is compensation
equity among the same positions and whether all roles are governed by the
guidelines of the compensation within the organisation system.
Thus, the figure depicts that there should be equitable distribution of
compensation with respect to job ranking, factor comparison, job
classification, point systems and level of status.

Now you will be able to understand this with the help of figure 4.2:
Job Factor
Ranking Comparison
Job Point
Classification Systems
Source: http://payroll.naukrihub.com/compensation/pay-structures.html
Figure 4.2: Diagram of Internal Equity
Example: An organisation may hire various social workers who carry out
their tasks within the same group of clients. Thus, by reviewing, identifying,
evaluating and comparing the pay of each and every employee with others
who are performing the same task, you will be able to analyse whether there
is existence of internal equity in the organisation or not.
This does not mean that all employees are getting the same compensation
but means that there is fair treatment of pay with respect to staff performing
the same job role. Hence, difference in pay is based on time period of
service, level of responsibility and education.
4.3.2 External equity
It exists where the company’s pay structure is equal to the average rates in
the company’s sector or market where employees perceive that they are
fairly rewarded and compensated with respect to those organisations where
the employees are performing the similar kind of work. Here, the
responsibility of the employer is to maintain such compensation structure in
the organisation which helps in keeping and motivating the talented,
qualified and competent employees.

Organizational Market
fairness Rate
Industry Competitors’
Standards Offer
Source: http://payroll.naukrihub.com/compensation/pay-structures.html
Figure 4.3: Diagram of External Equity
Thus, figure 4.3 depicts that there should be equitable distribution of

compensation with respect to organisational fairness, market rate structure,
industry standards and competitor’s offer.
Example: In order to lay emphasis on the quality of work life, a number of
non – profit firms are concentrating on the requirement of the full time
employees to work for 35 hours per week whereas other firms wants their
employees to work for 37.5 or even 40 hrs per week.
Apart from the above equities, there are several other equities. Equity at
workplace means fair treatment should be given to employees at workplace.
Individual equity, also known as pay for performance, is another type where
an employer rewards or compensates his/her employee based on his/her
performance. Lastly, personal equity exist when the employer compensates
a wage rate which satisfies and fulfils the perceived value or worth of the
individual employees as per his/her knowledge and experience of that
particular task which he/she has to perform.
4. Internal Equity is also known as pay for performance. (True/False)
5. Out of the following, which is not a type of equity:
(a) Internal
(b) Compensation
(c) Personal
(d) Individual

6. _________ means that fair treatment must be given to those who are
working in the organisation.
Activity 1
In order to encourage and motivate the aspirants to join money-making
tasks, an industry plans to offer tasks that suits people who have
knowledge related to task as well as competency. Nevertheless, the
compensation will be given as per the output generated by the aspirants.
Thus, whatever the organisation earns will be shared after reduction of
overheads and expenses of the organisation. Now as an HR Manager,
what motivating aspects your organisation would like to offer to aspirants
for joining. Explain in detail.
4.4 Job Evaluation

Job evaluation is the process of determining and identifying the relative
worth or the value of the job in relation with the various other jobs in the firm.
It helps the employers to justify the relative worth and employee to perceive
the satisfaction of worth as well as to assess the performance of the
employees. Thus, job evaluation has certain objectives which are as follows:
• create transparent and simple compensation structures
• fit new employment opportunities into the existing compensation
structures
• establish a basic and grading pay structure
• reduce the number of grievances over the relative pay
Job evaluation can be identified with the help of following elements which
are shown in figure 4.4.

Measuring job contents
Measuring relative worth in a co.
Job Linking its worth with the market Job

Evaluation Description
Linking with internal consistency
Working out point worth to design

structure
Source: Compensation Management, 1st Edition, Er Soni Shyam Singh, Excel Books
Figure 4.4: Diagram of Job Evaluation
The contents of job evaluation are as follows:

1. Job analysis: It is the process of examining the job content by breaking
it down into its functions, elements, tasks, operations and processes.
2. Job description: It is a written and general statement that outlines the
skills, education and training required by the potential employee to
perform the particular task.
3. Job classification: Here jobs are grouped with respect to their worth.
4. Job specification: It is a statement, which contains the qualifications
and characteristics of an employee, which are required for the
successful task completion.
With the help of table 4.1, you will be able to know about the internal job
structure of an organisation:
Table 4.1: Internal Structure of Job
Internal Consistency
Work Relationships Job Job Job Job
within the analysis description evaluation structure
organisation
Some Major Decisions in Job Evaluation
• Establish purpose of evaluation.
• Decide whether to use single or multiple plans.
• Choose among alternative approaches.
• Obtain involvement of relevant stakeholders.
• Evaluate plan’s usefulness.
Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya and

Nilanjan Sengupta, Excel Books

4.4.1 Methods of job evaluation

Job evaluation methods are used to determine the relative worth of an effort
which is made by the employees in the organisation. The various methods
are classified into two groups, which are shown in figure 4.5:
Job Evaluation Methods
Conventional Methods Non-conventional Methods
Quantitative Non-quantitative Quantitative Non-quantitative
Figure 4.5: Methods of Job Evaluation
Let’s discuss them as follows:

Conventional methods
It exists where the jobs are assessed and evaluated within standards that
are established in the organisation with the ratings, which are quantitative in
terms that identify and measure the relative worth. Thus, quantitative as well
as non – quantitative methods are covered in conventional methods, which
are represented with the help of figure 4.6:
Conventional Job Evaluation Methods
Quantitative Methods Non-Quantitative Methods
Point Rating Factor Comparison Ranking System Grade Classification

Method Method Method Method
Source: Compensation Management, 1st Edition, Er Soni Shyam Singh, Excel

Books
Figure 4.6: Conventional Methods of Job Evaluation

Quantitative methods: These are further sub-divided into two

(a) Point method: Job analysis and job description are the important
elements to identify the points and factors which are assigned to
different aspects of the job as per the quantitative description. Here, on
the basis of certain factors, jobs are broken down as follows:
Responsibility
Problem solving ability
Competencies
Leadership quality
Mental alertness
Physical effort
Thus, this method helps to design the rating. Now with the help of the
following example which is shown in table 4.2, you will be able to
understand the point method.
Table 4.2: Point Values to Factors along a Scale
Job: Bank Officer

Point values for degrees
Job Factor 1 2 3 4 5 Total

Skill 10 20 30 40 50 150
Physical effort 8 16 24 32 40 120
Mental effort 5 10 15 20 25 75
Responsibility 7 14 21 28 35 105
Working 6 12 18 24 30 90
conditions
540
Maximum total points of all factors depending on their importance to job = 540.
Therefore, the maximum points assigned to an officer’s job in a bank come to 540.
Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya

and Nilanjan Sengupta, Excel Books
After making an addition of key factors and sub key factors, the point
value say 500 may be given to the manager’s job. Now you may see
that this job is priced at a higher level of 5. In terms of total point, once
the job worth is expressed these points get converted into monetary
value by keeping in mind the daily and hourly rates of the wages which
is shown in table 4.3:

Table 4.3: Job Values of Bank Officers of Different Levels

and Responsibilities
Basic salary Job grades of key bank

Point range Officer
range (INR) officials
300 – 350 3000 – 4000 1 Officer
350 – 400 4000 – 5000 2 Accountant
400 – 450 5000 – 6000 3 Manager I Scale
450 – 500 6000 – 7000 4 Manager II Scale
500 – 540 7000 – 8000 5 Manager III Scale

and Nilanjan Sengupta, Excel Books
Therefore, the outcome creates a number of job grades, which are

based on the total points.
(b) Factor comparison method: This method basically identifies the
relative worth of the jobs by deciding the compensable factors to
perform them satisfactorily. These factors may include responsibilities,
working conditions, skills and efforts. Thus, the job factors required for
selected jobs vary from the human factors that are required for
performing in an efficient and effective manner. This comparison is
shown in table 4.4:
Table 4.4: Comparison made Between Job and Human Factors
Job factors Differentiation Human factors
Objective to Hire Time worked, Qty. produced, Knowledge, Skill and

Payment system desired Experience
Type of Contractual, Piece work Competence and Capability

Resource and based, Technical or staff and
Performance Productivity rated, Capacity
Standard to produce
Authority and Level of authority to direct Personal motivation and Self

Power and control activities motivation aspects
Development Potential to take challenges Learning attitude and Self

Potential motivation
(Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya and

Nilanjan Sengupta, Excel Books)

The acceptable rates for the various jobs are then determined
depending upon the job factors. These acceptable rates vary according
to type of job factor required by them as illustrated in the following
table 4.5:
Table 4.5: Different Job Factors
Job Factors and Job-A ` 8 per Job-B `12 Job-C ` 15
Acceptable rates
hour per hour per hour
1. Skill factor ` 4.5 ` 7.50 ` 9.00
2. Effort factor ` 1.75 ` 2.50 ` 3.50
3. Responsibility factor ` 0.25 ` 0.50 ` 1.50
4. Working condition ` 1.00 ` 1.50 ` 1.00
factor
and Nilanjan Sengupta, Excel Books)
Steps of factor comparison method

There are five steps in this method, which are as follows:
Step 1: Select / Benchmark the jobs
Step 2: Assign current pay rates to each job
Step 3: Distribute each wage rates into various factors
Step 4: Construct and develop the job factor comparison scale that is
percentage weight age of each factor, which is required for performing the
task
Step 5: Evaluate and analyse the jobs by using job comparison scale
Example: Table 4.6 below depicts a hypothetical factor comparison method
of job evaluation.
Table 4.6: A Hypothetical Factor Comparison Method Evaluation
Factors Daily Physical Mental Supervisory Working
wage effort share effort skill share condition
Key Jobs
share share
Machinist ` 150 ` 40 ` 60 `30 ` 20
Electrician ` 140 ` 40 ` 50 ` 30 ` 20
Fitter ` 130 ` 50 ` 50 ` 25 `5

Welder ` 100 ` 40 ` 40 ` 15 `5
Helper ` 90 ` 60 ` 20 `5 `5
Non - quantitative methods: These are of two types as discussed below:
(a) Ranking method: Here the jobs are regarded as a whole and are
ranked with respect to their complexity, value or importance of job in the
firm, job hierarchy and nature of the jobs. In this method, a committee,
which is composed of both employer and employee, is set up who
arranges the ranks of various jobs from higher to lower order.
Example: The following table 4.7 shows various jobs which are ranked
as per their departments. Their ranks are required to develop a
hierarchy in the organisation.
Table 4.7: Jobs Ranked as per their Department
Marketing Finance Production HRM R&D

General Cost and GM Works GM (HRM) R&D
Manager Accounts Manager
controller
Manager Finance Works Manager HRM Research
Manager Manager Assistants
Senior Cost and Production/Quality/ Administration Laboratory in
Executives A/c Engg. Managers Mgr. charge
Manager
Executives Clerks Supervisors/
Inspectors
Sales/Marketing
persons
(b) Job classification method: Here job specification as well as job

descriptions are analysed and then they are grouped into various levels
or grades, considering similarity in qualification, skills and expertise and
thus defining the grade hierarchy.
Example: The following table 4.8 depicts the job classification in a
business school.

Table 4.8: Job Classification in a Business School
Director
Academic staff Administrative staff

Job classes: Job classes:
Dean–Academics Dean – Administration
Professor In-charge – Admission
Associate Professor In-charge – Placement
Assistant Professor Accounts Manager
Lecturer Administrative Executive
Class description for academic staff:
Dean – Academics
Teaching
Responsible for all academic activities like:
Course curriculum review
Subjectwise faculty allocation
Overseeing examination related activities
Overseeing convocation related activities
Handling academic disciplinary issues
Professor
Teaching
Research
Consultancy
Institution building activities
Brand building
Associate Professor
Teaching
Research
Consultancy
Assistant Professor
Teaching
Research
Lecturer
Teaching
Therefore, job classification depends on the title and responsibility of the

job.
Non-conventional methods
These methods are also known as Innovative methods as in this the
systems are quite innovative as well as management decision-making

concepts are used for establishing internal equity. Here the jobs are
compared with one another and are least used in today’s competitive
scenario. Hence, this method covers the following:
1. Time Span of Discretion Theory: Here all the decisions related to the
task and their effect on the firm is felt after a certain time period for
taking up the follow up action.
Example: The Top Management decision may show its result after few
years as compared to the decision taken up by the supervisor (in a
week) and worker (in a few hours) decision.
2. The Urwick or Profile Method: This method was formed by the
consultants of management of a British firm who combined both the rank
and point methods which are used for paired comparison in order to
determine the weightings.
3. The Direct Consensus Method: In this method, the panel members
evaluate and record the ranking of job assessment of each individual
and then feed it into a system.
4. Decision Band Method: In this method, the decisions made are placed
and measured in the band, which is applicable to a particular job.
5. Hay Plan’s Guide Chart Profile Method: This method is related to the
managerial compensation which lays emphasis on the following three
vital factors:
Accountability (Act freely, impact on outcome etc.)
Know–how (Technological depth, human relations etc.)
Problem Solving (Challenging and thinking environment)
You will learn more about Hay plan in the next section.
4.4.2 System of job evaluation
In system of job evaluation, Hay system is quite important and is discussed
as below:
Hay system of job evaluation: This system of JE is best understood by a
point plan as it allows the organisation to measure the jobs, which reflect
their relative weight. This system evaluates job and not the people. It
provides the means to evaluate compensation across various functions and
markets.

How are jobs evaluated?

The questionnaires in job description are signed and completed by the
supervisor managerial staff and job holder who have that particular
responsibility for the position. This questionnaire is finally given to the
committee of JE for his/her evaluation. Then this committee meets with the
supervisor and job holder to explore queries and for content clarifications.
Finally, the members of the committee then make comparison and evaluate
their individuals and if any difference exists, they try to resolve it.
As you learnt in the earlier section, Hays job evaluation methodology
analyses and assesses all jobs based on 3 factors:
1. Know-how: The sum total of knowledge is acquired for the competence
and performance of job which includes:
Technical know how
HR know how
Managerial know how
The sum total comprises the overall fund of knowledge which consists of
3 dimensions:
know how of harmonising and integrating the functions that are
involved in the managerial situations
specialised techniques, learned disciplines and practical procedures
practicing active skills in the area of human rights
2. Problem solving: There are 2 dimensions in problem solving:

the challenge presented by the thinking to be done
the environment in which thinking takes place
Here thinking is required by the job for creating, analysing, making

conclusions, reasoning and evaluating.
3. Accountability: In accountability, the jobs are evaluated on the end
results. It has three dimensions:
magnitude(indicated by the areas of accountability and monetary
size)
freedom to act( guidance the job holder has and the degree of
procedural or personal control)
impact of job on end results


7. Job description is the process of determining and identifying the
relative worth or the values of the job in relation with the various other
jobs in the firm. (True/False)
8. In ______________________ method, jobs are assessed and
evaluated within standards that are established in the organisation with
the ratings which are quantitative in terms that identify and measure the
relative worth.
9. Out of the following which is not a non - conventional method:
(a) Direct Consensus Method
(b) Factor Comparison Method
(c) Time Span of Discretion Theory
(d) The Urwick or Profile Method
4.5 Process of Job Evaluation

The steps related to job evaluation are explained in the following figure 4.7:
Figure 4.7: Process of Job Evaluation
Thus, the figure 4.7 depicts steps, which are as follows:

Step 1: Appointment and creation of committee
In the first step a committee is set up which consists of experienced HR
experts, employees and union members so as to evaluate all the jobs in the
organisation.
Step 2: Finding and identifying jobs that needs to be evaluated
In the second step, the jobs in various departments of the organisations
need to be identified in order to find out which job requires to be evaluated.

Step 3: Analysing the job description and job analysis

The third step in the organisation is to conduct job analysis and job
description which is necessary for successful performance.
Step 4: Selection of job evaluation method
The fourth step in the evaluation of the job is to select the method for
evaluation. This must be identified while keeping the demands of the
organisation as well as factors related to job in mind.
Step 5: Classification of job and compensation
In the fifth step, the relative worth of the jobs are arranged as per the
requirement of skills, experience required, conditions under which the task is
to be carried out, responsibilities to be handled, degree of supervision that is
required and so on. Thus, all these factors are assigned by weights which
determine the relative worth of the job.
Step 6: Initiating the program
This step is further carried out when the action plan is ready and the top
management explain this plan to their employees and finally put it into
operation.
Step 7: Concluding results
Thus, final step in the evaluation of the job is to review and examine the jobs
periodically taking into account the environmental conditions such as
technology, services, products etc.
10. Out of the following, which is not related to the process of job
evaluation:
(a) Selection of job evaluation method
(b) Assign current pay rates to each job
(c) Concluding results
(d) Initiating the program
11. The jobs in various departments of the organisations need to be
identified in order to find out which job requires to be evaluated.
(True/False)
12. A ____________ is set up which consists of experienced HR experts,
employees and union members so as to evaluate all the jobs in the
organisation.

Activity 2
Imagine yourself as an HR manager of a 15 person workgroup, how would
you like to reassure the group when they know that job evaluation is going
to take place.
4.6 Problems Involved in Job Evaluation

At the commencement of the application of job evaluation, many hurdles
may occur with respect to economic, human and technical aspects. Due to
inappropriate method of communication, many people fail to understand
what job evaluation holds for them. Thus, following are the drawbacks,
which are seen while evaluating a job:
1. Comparison cannot be made among various jobs in different
organisations.
2. Now days, jobs are evaluated or assessed based on job factors. Thus,
there is a fluctuation in the factors related to job due to variations in
technology, production, division of labour, and information system.
3. Job evaluation is a time consuming process as it takes lot of time to be
installed as well as help from technical experts.
4. Sometimes job evaluation may create doubt and fear in the minds of
people and may even disrupt the existing psychological and social
relationships of employees whose jobs are assessed for the first time.
5. Comparing same kinds of jobs can be best carried out with the help of
job evaluation, but these comparisons can only be made for the
standard jobs as well as the salary that for the same kind of jobs.
6. It may create the ground for dispute and conflict among leaders of trade
union, programme operators, employees and top management due to
assigning different weight age to different factors.
7. The technique “Modus Operandi” of job evaluation is not easy to
understand even for the managers also.
8. When the evaluation of job score is inconsistent, employees perceive
that their organisation has not treated them fairly. So, scoring in
evaluation should be done on the basis of certain work criteria which
must be known to all the employees as well as the managers in the
organisation.

9. If the job evaluation is not prepared objectively, it is not regarded as a

useful tool because sometimes favouritism and personal biases may
make the results negative. The morale of the employees will suffer if
he/she comes to know that the manager is not evaluating his/her
performance as per the stated objectives criteria.
10. Some employees may feel that sometimes job evaluation creates an
environment of stress, tension and worry. When managers do not use
qualitative metrics and are not clear about the appraisal scores, the
reviews become less effective.
13. Job evaluation is a time consuming process as it takes lot of time to get
installed. (True/False)
14. The _______________ technique of job evaluation is not easy to
understand even for the managers.
15. State which of the following is not a drawback of job evaluation:
(a) Inconsistency
(b) Stress Evaluation
(c) Objectivity
(d) Time Saving
4.7 Summary
Let us recapitulate the important concepts discussed in this unit:
• In order to achieve goals of the organisation, the compensation system
is managed and designed with certain rules and regulations.
• The concept of equity is regarded as one of the most important factors
that affect the valence of rewards.
• Employees are motivated to support the organisation’s objectives as
well as perform much better when equitable fairness of pay is given to
them.
• Job evaluation is the process of determining and identifying the relative
worth or the values of the job in relation with the various other jobs in the
firm.

• The job evaluation methods are conventional and non – conventional.

They are used to determine the relative worth of efforts which are made
by the employees in the organisation.
• Due to inappropriate method of communication, many people fail to
understand what job evaluation holds for them.
4.8 Glossary
Equity: Equity is related to the equal payment for equal work, that is, there
should be fairness for the successful system of compensation.
External equity: It exists where the company’s pay structure is equal to the
average rates in the company’s sector or market where employees perceive
that they are fairly rewarded and compensated with respect to those
organisations where the employees are performing the similar kind of work.
Individual equity: It is also known as pay for performance where an
employer rewards or compensates his/her employee on the basis of his/her
performance.
Internal equity: It refers to the equal pay for the same kind of jobs in the
organisation.
Job analysis: It is the process of examining the job content which involves
breaking it down into its functions, elements, tasks, operations and
processes.
Job description: It is a written and general statement which outlines the
skills, education and training required by the potential employee to perform
a particular task.
Job evaluation: Job evaluation is the process of determining and
identifying the relative worth or the values of the job in relation with the
various other jobs in the firm.
Personal equity: It exists where the employer compensates a wage rate
which satisfies and fulfils the perceived value or worth of the individual
employees as per his/her knowledge and experience of that particular task
which he/she has to perform.
4.9 Terminal Questions

1. Briefly explain the building blocks of the compensation model with the
help of diagram.

2. Discuss the concept of equity in compensation. Distinguish between

internal and external equity.
3. Define job evaluation. What are the different methods of job evaluation?
4. Explain the procedure of job evaluation.
5. List out the problems that are associated with job evaluation.
4.10 Answers
1. (a) Job evaluation
2. True
3. Professional development
4. False
5. (b) Compensation
6. Equity at workplace
7. False
8. Conventional Method
9. (b) Factor Comparison Method
10. (b) Assign current pay rates to each job
11. True
12. Committee
13. True
14. Modus Operandi
15. (d) Time Saving
Terminal Questions
1. Compensation strategy at industry level is based on three building
blocks which are developed on the basis of compensation model. For
more details, refer to section 4.2.
2. Equity is related to the equal payment for equal work that is there should
be fairness to achieve a successful system of the compensation. For
more details, refer to section 4.3.
3. Job evaluation is the process of determining and identifying the relative
worth or the values of the job in relation with the various other jobs in the
firm. For more details, refer to section 4.4.

4. There are seven steps involved in the evaluation of job. For more
details, refer to section 4.5.
5. Due to inappropriate method of communication, many people fail to
understand what job evaluation holds for them. For more details refer to
section 4.6.
4.11 Case Study

Should Job Evaluation be General or Specific?
Mr. Pratap Singh, Personnel Manager of the Indian Oxygen Ltd., prepared a
job evaluation plan after a thorough study of all the jobs in the company, in
similar organisations and job evaluation plans in various other companies.
Mr. Singh and his colleagues in the Personnel Department concluded that a
general job evaluation plan will meet the requirements of the company and
satisfy the needs of the employees. Mr. Singh has submitted the plan (given
below) to the General Manager of the company. The plan was sent to the
recognised trade unions and to all the line managers of the company. The
trade union leaders readily accepted the plan, whilst all the line managers
totally rejected the plan.
The plan prepared by Mr. Singh and his colleagues is as follows:
S.No. Job Requirements Points
Range
1. Education up to graduation 0 – 10
beyond graduation 11 – 20
2. Training Technical 0 – 20
Commercial 0 – 30
Apprenticeship (two 0 – 10
points per year)
3. Previous Experience Technical (4 points per 0 – 40
year of experience)
Commercial (3 points per 0 – 30
one year)
4. Nature of work (depending on the Low, medium and high 0 – 15
complexity of work)
5. Dexterity (considering unusual Low, medium and high 0 – 10
speed, deftness, close-
coordination of eyes and
muscles)

6. Observation (depending upon Low, medium and high 0 – 20

the alertness)
7. Executive ability (depending Low, medium and high 0 – 60
upon ability to secure
cooperation)
8. Analytical ability (depending Low, medium and high 0 –40
upon obtaining and interpreting
relevant data)
9. Development (depending upon Low, medium and high 0-30
job requirements and facilities
offered by the organisation)
Questions
1. Why did the managers reject the plan?
2. What changes would you suggest to make the plan acceptable to the
line managers also?
Source: Human Resource Management, 3rd Edition, VSP Rao, Excel
Books
References:
• Singh, B. D. (2007). Compensation and Reward Management. Excel
Books Pvt. Ltd.
• Bhattacharya, M. S. & Sengupta, N. (2009). Compensation
Management. Excel Books Pvt Ltd.
• Singh, E. S. S. (2008). Compensation Management. Excel Books Pvt.
Ltd.
• Robinson, S. L. & Rousseau, D. M. (1994). "Violating the psychological
contract: Not the exception but the norm" Journal of Organizational
Behaviour 15, pp 245-259.
• Milkovich G. T. & Newman J. M. (2005). Compensation Management.
Tata McGraw Hill.
E-Reference:
• http://en.wikipedia.org/wiki/Compensation_methods/
Retrieved on 16 July 2012, Time: 10:40 AM
• http://theperfectpayplan.typepad.com/Pay_Equity_Article.pdf/
Retrieved on 16 July 2012, Time: 12:40 PM
• http://hrcouncil.ca/hr-toolkit/compensation-systems.cfm/
Retrieved on 16 July 2012, Time: 03:50 PM
• http://wiki.answers.com/Q/What_do_you_mean_by_Job_evaluation_and
_explain_the_process_of_job_evaluation/ Retrieved on 16 July 2012,
Time: 05:15 PM
• http://www.egyankosh.ac.in/bitstream/123456789/38251/1/Unit-6.pdf/
Retrieved on 17 July 2012, Time: 10:15 AM
• http://www.livestrong.com/article/220577-advantages-disadvantages-of-
job-evaluations/ Retrieved on 17 July 2012, Time: 11:10 AM

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Compensation and Benefits Unit 4

Unit 4 Job Evaluation

Sikkim Manipal University B1859 Page No.: 78

4.2 Compensation Strategy at Micro Level

CONSISTENCY Work Descriptions Evaluation INTERNAL

CONTRIBUTORS Seniority Performance- Variable INCENTIVE

LAW & ADMINISTRATION Planning Budgeting Communication EVALUATION

Source: Compensation Management, 1st Edition, B.D. Singh, Excel Books

Sikkim Manipal University B1859 Page No.: 79

According to the figure, the three building blocks of compensation model

2. Strategic policies/issues of compensation: The strategic policies/

3. Compensation techniques: There are different methods/techniques of

frequently reward good work in the form of bonuses. As employees

Sikkim Manipal University B1859 Page No.: 81

Self Assessment Questions

Sikkim Manipal University B1859 Page No.: 82

4.3 Concept of Equity

Sikkim Manipal University B1859 Page No.: 83

Sikkim Manipal University B1859 Page No.: 84

Thus, figure 4.3 depicts that there should be equitable distribution of

Sikkim Manipal University B1859 Page No.: 85

4.4 Job Evaluation

Sikkim Manipal University B1859 Page No.: 86

Measuring job contents

Measuring relative worth in a co.

Job Linking its worth with the market Job

Linking with internal consistency

Working out point worth to design

The contents of job evaluation are as follows:

Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya and

Sikkim Manipal University B1859 Page No.: 87

4.4.1 Methods of job evaluation

Job Evaluation Methods

Conventional Methods Non-conventional Methods

Quantitative Non-quantitative Quantitative Non-quantitative

Let’s discuss them as follows:

Conventional Job Evaluation Methods

Quantitative Methods Non-Quantitative Methods

Point Rating Factor Comparison Ranking System Grade Classification

Source: Compensation Management, 1st Edition, Er Soni Shyam Singh, Excel

Sikkim Manipal University B1859 Page No.: 88

Quantitative methods: These are further sub-divided into two

Job: Bank Officer

Job Factor 1 2 3 4 5 Total

Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya

Sikkim Manipal University B1859 Page No.: 89

Table 4.3: Job Values of Bank Officers of Different Levels

Basic salary Job grades of key bank

Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya

Therefore, the outcome creates a number of job grades, which are

Job factors Differentiation Human factors

Objective to Hire Time worked, Qty. produced, Knowledge, Skill and

Type of Contractual, Piece work Competence and Capability

Authority and Level of authority to direct Personal motivation and Self

Development Potential to take challenges Learning attitude and Self

(Source: Compensation Management, 1st Edition, Mousumi S. Bhattacharya and

Sikkim Manipal University B1859 Page No.: 90

Steps of factor comparison method

Sikkim Manipal University B1859 Page No.: 91