HR Basics: Job Evaluation
Summary
TLDRHR Basics explores job evaluation, a process to determine the relative worth of jobs within an organization. It discusses two major approaches: market-driven, which uses market rates without job evaluation points, and job worth systems, which assign points to job factors. The video outlines four job evaluation methods: ranking, classification, and the widely used point factor method, which quantifies job components, and market pricing, which focuses on external market pay data. The summary highlights the importance of aligning compensation with both internal equity and external market competitiveness.
Takeaways
- 📚 Job evaluation is a systematic process for determining the relative worth of jobs within an organization.
- 💼 It results in the development of an internal pay structure or hierarchical ranking of jobs, which forms the basis for base pay structures.
- 🌐 There are two major approaches to job evaluation: market-driven and job-worth systems, each with different focuses and outcomes.
- 📈 Market pricing uses market data to set pay rates without detailed job evaluation, focusing on external market rates.
- 🏢 Job worth systems incorporate market pricing data but assign points based on the job's value to the organization, emphasizing internal equity.
- 📊 Both methods use relative comparisons to assess job worth, with market pricing looking externally and job evaluation focusing internally.
- 🔢 The ranking method is a simple system that orders jobs by their value to the organization, suitable for small organizations with few jobs.
- 📖 The classification method uses written job class descriptions to categorize jobs, requiring subjective judgments to develop class descriptions.
- 📝 The point factor method is the most popular, assigning points to compensable factors within jobs, and is favored for its simplicity and quantification of job elements.
- 📉 Despite its effectiveness, the point factor method has been criticized for potentially reinforcing traditional and rigid organizational structures.
- 🔄 There is a trend towards market pricing as companies seek to ensure market competitiveness in their compensation practices.
Q & A
What is job evaluation?
-Job evaluation is the systematic process of determining the relative worth of jobs within an organization.
What is the outcome of job evaluation?
-The outcome of job evaluation is the development of an internal pay structure or hierarchical ranking of jobs.
What are the two major schools of thought in job evaluation?
-The two major schools of thought in job evaluation are market-driven and job worth systems.
How does market pricing determine pay in a compensation system?
-In a market-driven compensation system, the going rate identified by market research is the primary determinant of pay.
What is the primary determinant of pay in a job worth system?
-In a job worth system, the primary determinant of pay is the value of the job to the organization.
Why is it important to compare pay practices to the external market?
-Comparing pay practices to the external market ensures that an organization's compensation practices remain competitive and aligned with industry standards.
What are the four methods of job evaluation mentioned in the script?
-The four methods of job evaluation mentioned are ranking, classification, point factor, and market pricing.
How does the ranking method of job evaluation work?
-The ranking method places jobs in order from highest to lowest by their value to the organization, considering the entire job rather than individual components.
What is the classification method of job evaluation?
-The classification method uses written descriptions of job classes and places each job into the category that it best matches.
Why is the point factor method the most widely used job evaluation method?
-The point factor method is the most widely used because it is relatively simple to use and considers the components of the job rather than the total.
What is the main criticism of point factor systems?
-Point factor systems have been criticized for reinforcing traditional organizational structures and job rigidity.
Why are companies moving towards market pricing?
-Companies are moving towards market pricing to use market pay data to identify the relative value of jobs based on what other employers pay for similar work, ensuring market competitiveness of compensation practices.
Outlines
📈 Introduction to Job Evaluation
This segment introduces the concept of job evaluation, which is a systematic process to determine the relative worth of jobs within an organization. The goal of job evaluation is to establish an internal pay structure or a hierarchical ranking of jobs. It serves as the foundation for designing base pay structures. Two major approaches are discussed: market-driven and job-worth systems. Market-driven systems focus on the going rate identified by market research, while job-worth systems consider the value of the job to the organization. Both strategies are essential for building base pay structures and maintaining internal equity or reflecting external market pay practices.
Mindmap
Keywords
💡Job Evaluation
💡Internal Pay Structure
💡Market Pricing
💡Job Worth Systems
💡Market-Driven Compensation
💡Internally Driven Job Worth Systems
💡Ranking Method
💡Classification Method
💡Point Factor Method
💡Compensable Factors
💡Market Pricing Data
Highlights
Job evaluation is a systematic process to determine the relative worth of jobs.
It leads to the development of an internal pay structure or hierarchical ranking of jobs.
Job evaluation provides the foundation for designing base pay structures.
There are two major schools of thought in job evaluation: market-driven and job-worth systems.
Market pricing uses market data for jobs without job evaluation points.
Job worth systems use market pricing data but with job evaluation points.
Internally driven systems focus on maintaining internal equity.
External market-driven systems reflect how the outside world pays for positions.
It's important to compare pay practices to the external market.
A base pay structure is developed using the compensation philosophy and job analysis procedures.
Market pricing focuses externally while job evaluation focuses internally.
There are four methods of job evaluation: ranking, classification, point factor, and market pricing.
The ranking method places jobs in order by their value to the organization.
The classification method uses written descriptions of job classes to categorize jobs.
The point factor method is the most widely used and assigns weights to compensable factors.
Compensable factors are dimensions that can be rated for each job, like education and experience.
The point factor method is simple, quantifies job elements, and is better than ranking and classification.
Market pricing is becoming more popular as it uses market pay data to identify the relative value of jobs.
Market pricing ensures market competitiveness of compensation practices.
A market-based approach balanced with internal alignment enables more reliable pay grades and ranges.
There may not always be a perfect match for each job in the external market, introducing some subjectivity.
Transcripts
[Music]
HR Basics is a series of short lessons
designed to highlight what you need to
know about a particular Human Resource
Management Topic in this HR Basics we'll
Define job evaluation and explore the
methods for determining the relative
worth of
jobs job evaluation is the systematic
process of determining the relative
worth of jobs the outcome of job
evaluation is the development of an
internal pay structure or hierarchical
ranking of
jobs job evaluation provides the
foundation to design base pay structures
there are two major schools of thought
and job evaluation Market driven and job
worth systems these strategies help us
build base pay structures first market
pricing uses market pricing data for
jobs but without jobal Val ation points
in a market-driven compensation system
the going rate identified by market
research is the primary determinant of
pay and then number two job evaluation
which uses market pricing data for jobs
but with job evaluation points in this
job worth system the primary determinant
of pay is the value of the job to the
organization each yield different
results internally driven job worth
systems will air on the side of
maintaining internal equity in external
Market driven systems will air on the
side of reflecting how the outside world
pays for the position whether an
organization uses an internally or
externally driven pay system it's
important to compare pay practices to
the external
Market a base pay structure is developed
using the compensation philosophy and
job analysis procedures of an
organization to drive job evaluation
decisions the results of job evaluation
are used to design pay structures
including pay grades and ranges market
pricing has an external Focus while job
evaluation has an internal Focus as you
see labeled in this diagram job
evaluation looks at pay levels within an
organization and market pricing looks
outside of the organization both methods
use relative comparisons to determine
the worth of jobs to an
organization as you see here there are
four methods of job evaluation let's
take a look at each starting with job
evaluation methods with an internal
Focus the ranking method is a simple
system that places jobs in order from
highest to lowest by their value to the
organization this is a quantitative
method in which the entire job is
considered rather than individual
components the ranking method generally
is more appropriate for a small
organization that has relatively few
jobs the classification method of job
evaluation uses written descriptions of
job classes in which each job job is put
into a category that it best matches
think of it as bookshelving a major
difficulty with this method is that
subjective judgments are needed to
develop class descriptions that then you
place job descriptions
in the most widely used job evaluation
method is the point factor method which
looks at compensable factors in a group
of similar jobs and assigns weights or
points to them a compensable factor
identifies a dimension that is part of
every job that can be rated for each job
for example all jobs require some level
of education and experience for
successful performance the point factor
method is the most popular job
evaluation approach because it's
relatively simple to use and considers
the components of the job rather than
the total however point factor systems
have been criticized for reinforcing
traditional organizational structures
and job rigidity although not perfect
the point factor method is generally
better than ranking and classification
methods of job evaluation because it
quantifies job
elements well the point factor method
has served employers well for many years
the trend is moving towards a more
externally focused approach more
companies are moving to market pricing
which uses Market pay data to identify
the relative value of jobs based on what
other employers pay for similar work key
to market pricing is identifying
relevant Market pay data for jobs that
are good matches with the employer jobs
the switch to market pricing is a
strategic compensation decision can
ensure Market competitiveness of
compensation practices those who argue
in favor of the popularity of market
pricing suggest that a market-based
approach balanced with some internal
alignment will enable more reliable pay
grades and ranges however there will not
always be a perfect match for each job
in the external market so some
subjectivity does exist
[Music]
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