Is your organization compensating people fairly? A conscious effort to evaluate and adjust your pay structures can help you recruit and retain satisfied, productive employees. Because when paid fairly, 82% of workers experience more engagement and fulfillment from their jobs.
Written by Erik van Vulpen Reviewed by Monika Nemcova 12 minutes read
Job evaluation is a complex but critical process in achieving pay equity. By comparing the responsibilities of each role within your organization, you will learn how to allocate wages fairly to remedy pay discrepancies. Not only do employees appreciate this, but it’s also good for business. Research has shown that companies that achieve pay equity are more likely to attract the right talent, meet financial goals, and effectively practice innovation.
In this article, we will explain what job evaluation is, discuss key methods of job evaluation, take you through the full job evaluation process, and share some job evaluation examples. Let’s dive in!
Job evaluation is the systematic process of using internal and external data to determine the relative value that specific jobs bring to an organization. This ensures that compensation is commensurate with the worth of individual roles and that each has appropriate entry and performance requirements.
The goal of job evaluation is to compare jobs with each other to create a pay structure that is fair, equitable, and consistent for everyone.
HR is responsible for job evaluation but may partner with a consulting company that conducts the process. In any case, there must be collaboration with leadership teams and workers’ unions or other partners to confirm the evaluation criteria for each position. For instance, these can be working conditions, required skills, degree of difficulty, and supervision needed.
Job evaluation determines the relative worth of a job based on the role itself and not the individual skills of the person performing the job. According to a European Commission report on pay transparency, “(t)he determination of the worth of a job is assessed irrespective of the qualities of the specific job holder.”
The relative worth corresponds to a ranking, which then corresponds to pay scales (called wage grids). Based on this evaluation, the job is added to the job structure. The resulting structure ensures pay transparency and equity between various groups of employees.
Personal qualities of the job holder, including seniority, education level, and tenure, are rewarded by an entitlement to higher steps within the applicable pay bracket.
The European Commission actively encourages the use of job evaluation. According to Cordis, which coordinates EU-supported R&D activities, 49% of European organizations in the private sector use a formal job evaluation scheme, with small and mid-sized businesses at less than 3%. This lack of evaluation leads to unstructured wage payment practices and a lack of requirement-based career and skill development for employees.
Check out our Learning Bite to learn everything you need to know about the Job Evaluation.
Job evaluation and job analysis, though closely related, serve distinct purposes within an organization. While job evaluation assesses the relative value of positions within an organization, a job analysis provides the foundational information necessary for the evaluation. Job analysis determines a position’s duties, responsibilities, and environment, as well as which skills, credentials, tools, and equipment are needed to perform the job.
Essentially, job analysis outlines what a job entails and the environment in which it is performed, serving as a critical input for creating accurate job descriptions. These descriptions, in turn, are instrumental for job evaluation, as they offer a comprehensive overview of each role, enabling organizations to accurately assess and compare the value of jobs to the company.
There are a variety of methods for job evaluation, and all of them involve comparisons derived from either qualitative or quantitative data. Qualitative methods draw comparisons from a subjective review of each position’s characteristics. Quantitative methods assign numerical values to each position and depict the comparison in numbers.
Here is a look at how four common job evaluation methods fall into these two categories:
| Qualitative | Quantitative | |
| Job-to-job comparison | Ranking method/ pair comparison ranking | Factor comparison method |
| Job to pre-determined grade comparison | Job classification | Point factor method |
Each type has its advantages and disadvantages. The qualitative methods are usually faster while the quantitative methods are more objective and account for required skills and responsibilities. The best approach is typically a combination of techniques.
Next to the four above-mentioned methods, market pricing and Hay job evaluation system are also often used to conduct job evaluations.
Following is a brief explanation of six job evaluation methods:
| Evaluation method | Description |
| Ranking method/ Paired comparison | This simple qualitative method creates a hierarchy of positions that is decided by leadership. Jobs are paired, and for each pair, the most impactful job is chosen. This results in a forced ranking of different jobs based on their importance and seniority. |
Job evaluation methods are selected depending on organizational size and complexity. The paired comparison method (choosing the more impactful job of a pair, as displayed below) works well for smaller organizations, while a factor comparison or a point method of job evaluation works better for larger companies.
Once you’ve collected the data for individual jobs, you can create an overview of all the jobs within your organization or a certain department.
Based on that, you can visualize the spread of points and a salary range per job, similar to the image below. Any outliers can be calculated and need to be dealt with on an individual basis, as we discuss in the next section.
Implementing a job evaluation demands significant time and planning. While each method has its own procedures, there are some general phases involved in every job evaluation process. We’re outlining the following four phases to guide you through executing an effective job evaluation:
A job evaluation project starts with an initial workshop to decide on the scope and approach.
Next comes identifying benchmark jobs, planning the data collection, and forming a communication plan for the job evaluation team.
Bear in mind that this phase will require multiple meetings to cover everything. Rushed planning can result in more roadblocks and inefficiencies that slow or stall the process.
The second phase involves determining which evaluation elements and levels to incorporate as benchmarks. This often happens through a workshop to discuss how various roles impact the organization.
It is important to identify relatively timeless elements because the job scheme is relevant only for as long as the elements it is based on are relevant.
The third phase starts with discussing the collected data and the weightings of the different elements. This may require some fine-tuning as initial definitions often skew the results.
Next comes drafting a pay grade structure and categorizing jobs. It is likely that certain jobs will not fit perfectly within the pay grade structure. For example, these can be specialist roles in artificial intelligence and machine learning that are in demand and crucial for the company’s future. These jobs may have to be ranked higher on the salary scale than their titles correlate with. As qualified candidates for these roles become more abundant in the future, their placement on the pay scale may need to be revised.
The final phase of the job evaluation process is where the new pay structure is implemented. It is crucial to explain to everyone affected why their pay grade may have changed.
This phase goes smoother when there is buy-in throughout the organization. There should be an opportunity for employees to appeal decisions they perceive as unfair. Investigating these circumstances will help employees feel heard, ensure transparency, and uncover potential discrepancies in the system that need to be remedied.
As a note of caution, lowering current workers’ salaries is not advisable. This will cause unrest, lower morale, and prompt people to leave the organization. Furthermore, certain wages are protected under labor laws.
There are all kinds of scenarios where conducting a job evaluation is a good idea. Here are three job evaluation examples that demonstrate how it can be put into action.
When Scotland’s regional and specialist police forces merged, Police Scotland/Scottish Police Authority (SPA) became the second-largest law enforcement group in the U.K. Since each agency came in with its own compensation program, a job evaluation was needed to create a fair and consistent pay and grading system for the combined staff.
Police Scotland/SPA hired a consultant to conduct the process with the help of a factor-based job evaluation software program. After a thorough assessment of over 800 staff roles, they were able to create an appropriate pay and grading structure.
In this hypothetical example, a mid-sized e-commerce company was struggling to fill entry-level customer service positions that were crucial for its growing business. The hiring managers noted that applicants often desired higher starting pay than was offered.
The HR director used the market pricing job evaluation method to gather external market data and compare its salaries to those of similar-sized organizations. The comparison showed that their starting salary was roughly 15% lower than average. This information incentivized the leadership team to approve an increase in starting pay and expand the salary range for these roles.
In another speculative example, a locally owned landscaping business offered a range of services from lawn maintenance to tree removal. The company was expanding and needed to formalize how employees were paid. Despite handling different responsibilities, most were earning the same hourly wage.
These categories were based on the level of responsibility and expertise needed to handle tasks and operate specific equipment. With clarification of what each role contributes, employees were paid appropriately via a justifiable method.
Job evaluation is the basis for making informed decisions about distributing pay effectively and achieving equitable compensation for employees. The process requires a significant commitment of time and resources. However, understanding each role and assessing its compensatory value is well worth the effort.
A transparent and coherent pay structure promotes pay satisfaction by showing employees how they are paid for what they do. It can also increase their motivation to be productive and improve their skills to achieve career growth.
If you’d like to learn more about job evaluation, we recommend the Hay Job Evaluation Manual and the book Job Evaluation by Armstrong and colleagues, which we used as one of the resources for this article.
Job evaluation is the systematic process of determining the relative value of different jobs by comparing them to each other. The goal of job evaluation is to create a consistent and fair pay structure.
What are common job evaluation methods?Four common job evaluation methods are the ranking method, job classification, the factor comparison method, and the point-factor method. Other well-known methods include market pricing and Hay job evaluation system.
What is the classification method of job evaluation?The job classification method ranks jobs based on a pre-determined grade comparison. Example classifications would be CEO, vice president, director, manager, and operator.
What is an example of a job evaluation?An example of a job evaluation would be when an organization goes through the process of comparing jobs and formalizing pay ranges to address salary disparities among similar positions.
