Job evaluation is defined as a systematic process of determining the relative worth of jobs in relation to other job in order to establish which jobs should be paid more than others within an organization (Snell & Bohlander, 2010). The goal of job evaluation is to achieve internal equity during the salary system formation. In other word, job evaluation means the process of objectively determining the relative worth of jobs within an organization. It involves a systematic study and analysis of job duties and requirements. The evaluation is based on a number of compensable factors. Job evaluation can measure the value of all jobs within an organization and produces a rank order ranging from entry level positions to the most senior positions within an organization. It provides a framework to administer pay. The purpose of job evaluation is to helps established internal equity between various jobs in which wage paid is equal to the value of the job. When establishing the worth of a position, issues of internal equity are considered. Internal equity is defined as fairness in the relationship of a job’s salary range when compared with the salary ranges of similar jobs within the organization. The salary range for a job is considered internally equitable if the salary is commensurate with responsibility level of the position. It is important that a job evaluation is felt to be fair by everyone in the organisation. Effective communication, ongoing consultation and transparency are critical to the success of any scheme. Making a success of any job evaluation scheme will involve commitment by senior managers, transparency and cost as organisations will need to be able to pay for any grading structure. There are numbers benefits of job evaluation such as know exactly what duties each job holder carries out, understand training needs for individual jobs, improve job design, identify health and safety hazards, and encourage dialogue between managers and employees and improve levels of trust. There are several methods to do the job evaluation. Namely, job ranking system, job classification system, point system, and factor comparison system.
Firstly, job ranking system is the easiest, fastest, and least expensive approach to job evaluation. It is also most effective in smaller organizations with few job classifications (Susan. M, 2013). To rank positions, order jobs from highest to lowest based on their relative value in an organization. The process of job ranking typically assigns more value to jobs that require managerial or technical competencies. More value is also assigned to jobs that supervise, exercise decision-making authority, or rely on independent judgment. In other words, the more critical of the job, the more higher the position of the job will be placed in the organization. For example, a job-ranking system might rank the job of CEO as the most valued job within the organization and the job of product assembler as the least valued. There are advantages and disadvantages of the job ranking system. The advantage is simplicity is the main advantage in using a ranking system. It is also easy to communicate the results to employees, and it is easy to understand. Meanwhile, the disadvantages is ranking jobs is subjective. Jobs are evaluated, and their value and complexity are often assessed on the basis of opinion. Also, when creating a new job, existing jobs must be re-ranked to accommodate the new position.
Secondly, job classification system. Job classification system is defined as a system of the job evaluation in which jobs are classified and grouped according to a series of predetermined wage grades (Snell & Bohlander, 2010). The general purpose of job classification is to create and maintain pay grades for comparable work across the organization. To conduct a job classification, first is to write descriptions for a category of jobs. Next, develop standards for each job category by describing the key characteristics of those jobs in the category. Finally, match all jobs to the categories based on the similarity of tasks, the decision-making exercised, and the job's contribution to the organization's overall goals. Universities, government employers and agencies, and other large organizations with limited resources typically use job classification systems. These types of organizations have many types of jobs at diverse locations and must maintain equitable and fair standards across all work settings. The advantage of job classification system is job classification is simple once you establish your categories. You can assign new jobs and jobs with changing responsibilities within the existing system. However, the disadvantage is that job classification is subjective, so jobs might fall into several categories. Decisions rely on the judgment of the job evaluator. Job evaluators must evaluate jobs carefully because similar titles might describe different jobs from different work sites.
Thirdly, point system. This method involves evaluation based on main job factors known as compensable factor such as education level, skills, working conditions, efforts and responsibilities. Total point are assigned to jobs based on the degree to which job possess different compensable factors. This method is widely used currently. Here, jobs are expressed in terms of key factors. Points are assigned to each factor after prioritizing each factor in order of importance. The points are summed up to determine the wage rate for the job. Jobs with similar point totals are placed in similar pay grades. The procedures involved are firstly, select key jobs. Identify the factors common to all the identified jobs such as skill, effort, responsibility, and others. Then, divide each major factor into a number of sub factors. Each sub factor is defined and expressed clearly in the order of importance, preferably along a scale. The educational requirements (sub factor) under the skill (key factor) may be expressed thus in the order of importance. Next, find the maximum number of points assigned to each job (after adding up the point values of all sub-factors of such a job). This would help in finding the relative worth of a job. For instance, the maximum points assigned to an officer's job in a bank come to 540. The manager's job, after adding up key factors + sub factors points, may be getting a point value of say 650 from the job evaluation committee. This job is now priced at a higher level. Finally, once the worth of a job in terms of total points is expressed, the points are converted into money values keeping in view the hourly/daily wage rates. A wage survey is usually undertaken to collect wage rates of certain key jobs in the organization. The advantage of this method is often viewed as less biased than other methods because the job evaluator assigns each job's total points before the compensable factors become part of the equation. In contrast, Subjective decisions about compensable factors and the associated points assigned might be dominated. The job evaluator must be aware of biases and ensure that they are not represented in points assigned to jobs that are traditionally held by minority and female employees.
Lastly is factor comparison system. Factor comparison system is a job evaluation system that permits the evaluation process to be accomplished on a factor-by-factor basis by developing a factor comparison scale. The compensable factors of a job evaluated are compared against the compensable factors of key jobs within the organization that serve as the job evaluation scale (Snell & Bohlander, 2010). Factor comparison method is the most complex method of all, it is consistent and appreciable. Under this method, instead of ranking complete jobs, each job is ranked according to a series of factors. These factors include mental effort, physical effort, skill needed, responsibility, supervisory responsibility, working conditions and other such factors (for instance, know-how, problem solving abilities, accountability). Pay will be assigned in this method by comparing the weights of the factors required for each job, i.e., the present wages paid for key jobs may be divided among the factors weighted by importance (the most important factor, for instance, mental effort, receives the highest weight). In other words, wages are assigned to the job in comparison to its ranking on each job factor. Usually, the raters identify several evaluation factors, determine degree of difficulty of each job according to the factor scales and rank the money allocation appropriate for the job. The allocation rank is based on the value of the job based on comparison of several factors. The worth of a job is then obtained by adding together all the factor values. The more factor needed to do the job compared to other jobs, the more money is allocated to it.