Job Evaluation

Conceptual Overview

Although precursors can be traced at the end of the 19th century, modern job-evaluation systems developed at the beginning of the previous century and spread in large American companies after World War II. In Europe, it occurred later than in the United States, in line with its later industrialization. Job evaluation differs from any other evaluation process (e.g., skill evaluation, performance evaluation, or potential evaluation) as it rates jobs and not persons. The principal purpose of job evaluation is to promote internal pay equity (e.g., to meet the “equal pay for equal work” obligations), designing a compensation system that pays the most for the jobs with most worth. Job evaluation is the process through which the relative worth of jobs in an organization is set.

The development of a job-evaluation system requires the commitment and sponsorship of the top management and the definition of participants to the project, which normally include compensation specialists, managers, supervisors, and job incumbents. Once the system has been developed, it is necessary training in the use of the system. Results of the evaluation process need revision from higher levels; approved results need to be communicated to managers, supervisors, and incumbents. The cost for the development of a job-evaluation system can be very high and varies according to the different methods depicted below; the more analytical the method, the more costing the development.

Job evaluation begins with job analysis, followed by job description. Job descriptions are the basis for the assessment of the relative worth of jobs or a group of jobs. The assessment refers to the content of a job—skills, knowledge, and abilities required, level of education, working conditions, and responsibilities—and to the value or contribution of each job to the company's goals.

Of several job-evaluation methods, the most common are ranking, classification, factor comparison, point factor, and hybrids methods. Ranking involves comparing whole jobs with one another and arranging them in a hierarchy. Classification starts with the definition of grades into which jobs will be placed according to the characteristics expressed in the description and in the grade. Jobs are assigned to the best-fit grade. Factor comparison evaluates and compares jobs on the analysis of a number of defined factors. The point-factor method, the most common around the world, was developed by Edward N. Hay and marketed through his consulting firm. The point-factor method starts with the selection of the compensable factors and the definition of the relative weight of each factor. Each job is rated on each compensable factor using job descriptions, questionnaires, and/or interviews. Total points are counted for each job or job class. The last step assigns a specified point score to a specific wage level using salary scales, which usually results from wage surveys and benchmarking. Internal and external equity are also considered.

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