Job Evaluation: Methods, Benefits, and Best Practices

Offering competitive roles and salaries is essential to hiring and retaining top talent. But how do you know if you're offering the best possible compensation packages to existing employees and potential candidates? Through job evaluation!

Job evaluation is a way for human resources and other leaders in the company to assess the value of each role in your organization. It involves comparing and analyzing internal and external factors like responsibilities, skills, education, and competitive market data to determine the overall value of each position.

Once you've evaluated all the jobs within your organization, you can create a competitive compensation strategy that takes market rates and internal equity into account. Here’s how to get started.

What is The Purpose of a Job Evaluation?

The aim of job evaluation, or job analysis, is to provide all employees with equitable pay and rewards. Companies use job evaluations to establish pay grades, salary ranges, and other compensation policies that are internally equitable and externally competitive. These evaluations also help ensure that jobs are fairly classified and that employees are compensated according to the value and contribution they bring to the organization. 

By conducting job evaluations, you can make data-driven decisions and create a more transparent, consistent, and objective approach to compensation and career development. This information can shape decisions for updating job descriptions and pay structures or making wide-scale salary adjustments.

Common Job Evaluation Methods

There are four primary methods of job evaluation that companies can use. Each method uses a set of criteria and factors to evaluate each position. These factors include:

• A position's revenue potential
• Physical or other demands
• Working conditions
• Required experience, skills, and education
• Level of responsibility, including decision-making
• Level of autonomy
• Current market salary ranges

While each method uses some of the same criteria, the way the information is evaluated varies slightly between each one.

Ranking Method

With the ranking method, you compare and order jobs in your company based on their relative value to each other. To use this method, you rank each job from "highest" to "lowest" based on your set of criteria. Criteria for this method could include each title’s required experience, skills, and education, and whether it has decision-making responsibilities. 

HR teams can use the ranking method to identify variations in the duties, authority, and responsibilities within various positions and use that information to make their evaluation. This is one of the easiest methods to use, especially for smaller teams who don’t have a lot of job titles within an organization. This may not be as effective for companies with a lot of titles that are closely related to each other, because it doesn’t compare or weight positions against each other.

Classification Method

Under the classification method, jobs are separated into broad categories, then some roles are further separated into specific levels or grades. For example, you may order your grade classifications as:

• President
• Vice President
• Director
• Manager
• Associate

When companies use this method of job evaluation, they use the classification of each role to determine its value to the organization and assign a salary range.

The goal of the classification method is to create a hierarchy of roles in the organization and to show the value of each position. It also encourages career growth by providing clearly outlined paths for advancement and career development opportunities for employees.

Factor Comparison Method

The factor comparison method requires you to first identify the relevant factors in determining job value, such as the criteria we've listed above. Then you assign a weighted value to each factor to reflect its relative importance within the organization.

This method allows HR teams to get granular and give levels to nuanced factors. For example, say you have two marketing roles but one requires experience managing a team and making decisions while the other does not. The role that requires people management would be weighted slightly heavier because it requires more responsibility.

Once the factors have been weighted accordingly, each job can then be evaluated against them and given a score based upon its combined values.

Point Factor Method

The point factor method is very similar to the factor comparison method, in that it gives points to each factor in a set of criteria. However, it assigns a point value to each factor, rather than a compared weighted value. 

Once you have assigned points to each factor accordingly, you can go through all the roles in your organization to assign each one a number of points. For example, you could give a point for each skill a job requires. So if a job requires seven specific skills, you would give it seven points. If another job requires three skills, you would give it three points. 

After you’ve accumulated the point totals for all jobs, you can establish their salary ranges.

Job Evaluation Benefits

Companies can derive multiple benefits from job evaluations. They help organizations establish consistent, objective, and effective approaches for handling compensation, career development, and employee benefits.

Supports Pay Equity

Job evaluations help organizations monitor pay equity by allowing them to compare and analyze the value of each job. By taking into account external factors like competitive market salaries for similar roles, companies can make sure they are paying employees fairly based on the job's value to the organization.

By evaluating jobs in an organization, employers can identify any discrepancies between internal equity and external market rates. Then they can adjust salaries accordingly to ensure their employees are compensated fairly according to their experience, qualifications, and duties.

Promotes Pay Transparency

Job evaluation can help create greater pay transparency within an organization by making compensation structures clearer and easier to understand. This helps employees know what they are entitled to when it comes to salary and benefits, based on their background and experience. 

And pay transparency really matters to employees: 60% of workers say they would be interested in switching to another company if it means greater salary transparency, according to a report from Beqom. Such compensation clarity gives employees clear benchmarks to strive for in terms of career growth, which encourages them to develop their skills and work towards promotions or higher earning potential. By keeping pay transparent, companies can ensure people who perform the same tasks are paid equally regardless of gender, age, race or any other qualifications.

Supports Recruitment and Retention Efforts

Job evaluation can be a powerful tool for keeping pay competitive and on par with the job market. By evaluating all roles within the organization, employers can assess market trends and industry averages for similar positions. This keeps compensation up-to-date to attract top talent, as well as retain current employees by ensuring they are being paid fairly and competitively.

Job Evaluation Best Practices

If you haven’t done a job evaluation or you’re looking to improve the process for your company, there are a few best practices to consider. 

Establish a Job Evaluation Plan

Having a plan in place for the job evaluation process can make it go smoother. Set up a meeting with all stakeholders so you can map out each step and assign responsibilities.

You job evaluation plan should identify

• Your budget
• Which method you're using
• How long the process will take
• How you're going to collect data
• Who is involved and what their responsibilities are
• How you're going to communicate information company-wide

Clearly Communicate Changes With Employees

Once the job evaluation process is wrapped up, communicate your findings to employees. You can share general findings company-wide, but for job-specific changes, it's best to communicate with the affected employees directly. You can let them know of any role or salary changes in-person via a virtual video call, email, or through your company messaging platform.

Reassess Job Evaluations on an Annual Basis

Job evaluations should be conducted periodically to ensure that roles, responsibilities, and expectations are staying up-to-date with the changing job market and company needs. Regularly reviewing job evaluations will also help keep compensation strategies tied to market evolutions.

Prioritize Your Employee’s Professional and Personal Wellbeing

Job evaluations are a valuable first step to ensuring your compensation strategy is able to draw in and retain talent. As you go through this process, it’s important to keep in mind that compensation is more than salary. While competitive pay is critical, today's workers also want a company that contributes to their overall wellbeing — more than three quarters of employees believe their wellbeing is just as important as their salary. 

A wellness program can meet help your company meet this demand, strengthening your talent retention in a world where seven out of every 10 of workers would consider leaving a company that doesn’t focus on employee wellbeing. It shows employees your organization is dedicated to their wellbeing no matter their job description. 

If you want to learn more about how to foster an environment of employee wellness and success, speak with a Wellhub wellbeing specialist today. 

References

• Indeed for Employers. (n.d.). What Is Competitive Pay? Indeed. Retrieved May 10, 2023, from https://www.indeed.com/hire/c/info/what-is-competitive-pay.
• ADP. (n.d.). Pay Equity. ADP. Retrieved May 10, 2023, from https://www.adp.com/resources/articles-and-insights/articles/p/pay-equity.aspx. 
• Beqom. (2022). 2022 Compensation and Culture Report. Beqom. Retrieved May 10, 2023, from https://4022322.fs1.hubspotusercontent-na1.net/hubfs/4022322/E-Guides%20And%20Reports/eGuide-2022-Compensation-And-Culture-Report.pdf.