One of the most recurrent issues associated with compensation and reward is to establish the most adequate and appropriate rate of pay for each member of staff. Although more recently employers are mainly focused on designing and developing suitable and consistent variable pay and incentives schemes, an appropriate and systematic approach to basic pay determination is clearly important too, not least to avoid possible disputes and discrimination claims.
Job evaluation, enabling businesses to assess and determine the worth, size and significance of all jobs within a workplace, is a method of pay determination which can help employers to successfully cope with pay and all of the issues associated with its determination. This approach is essentially based on the assessment of each job carried out within an organisation (Torrington et al, 2008) in order to establish the relevance and significance of each of them and place them in a hierarchical order accordingly.
As such job evaluation definitely represents a consistent and structured approach (ACAS, 2005) by means of which jobs are ranked according to the degree of responsibility, knowledge, assertiveness, experience and expertise they require by each job holder to properly and effectively produce the expected results.
The British Standards Institution (BSI) defines job evaluation (definition 32529) as “any method ranking the relative worth of jobs which can then be used for a remuneration system”. We are then essentially looking at a comparative method and, in fact, job evaluation is essentially very much concerned with internal relativities.
Once each job has been placed in a fair and consistent grading structure, not only can employers develop an equitable grade pay system, but can they also effectively make comparisons with the market rates for similar, even though complex, jobs.
Last but not least, the established link between salary range and grade on the one hand and the kind and importance of the job performed on the other hand will also clearly enable employers to meet equal pay requirements and avoid gender pay discrimination. It is, in fact, definitely worth reminding that compensation’s equity falls upon the matters object of legislation protection (UK: Equal Pay Act 1970, amended in 1984 – USA: Equal Pay Act 1963, amended in 2003).
So that, fairness, transparency and objectivity should be the fundamental principles on the basis of which job evaluation has to be carried out within an organisation. Human capital budged will then be divided amongst staff, or rather amongst job holders, according to the size and importance of each role and the contribution each job is supposed to make, according its assessment findings, to an organisation’s aims and objectives achievement.
Determining the right salary for a job holder and trying to find out how much more or how much less he/she should earn in comparison with another individual is actually the conundrum employers are continually called to cope with in order to determine the right pay for each member of their staff.
In general, factors coming to play in this circumstance are actually three: performance, market rate and fairness (Torrington et al, 2008). Although the assessment of each of these factors, on its own, will not be sufficient to overcome the pay determination conundrum, it is also true that their combined synergetic use can enable businesses to definitely attain better results and more reliable outcomes from their salary determination procedures.
Performance is associated with the activity carried out by individuals, it refers to the way an individual executes a task and to the consequent results his/her activity produces. Put it another way, performance is not linked to a job or role but to the way it is carried out. Looking at one specific job, results produced by its fulfilment could clearly be different according to the way each individual will execute the tasks associated with it. The assessment of an employee performance, then, when linked to the individual’s salary determination process, is linked to each individual knowledge, capabilities, skills, motivation degree and ultimately his/her capability to deliver appreciable results for the organisation, but it has nothing to do with the performed job’s size and relativity.
Gaining a thorough knowledge and understanding of the local (and eventually national and international) labour market rates is certainly of pivotal importance too, but in order to attract and retain individuals. It can basically enable businesses to stay competitive in the labour market and to be aware of and stay in contact with, the external environment and its latest trends and development. But also market rates have actually no links at all with the size and scope of jobs and, let alone, with internal relativities.
Applying fairness and equity in salary determination processes clearly represents a crucial factor, not only for the legal implications it is associated with, but also because it enables employers to determine the right pay for people carrying out the same kind of job.
The investigation of these factors clearly put employers in the position to acquire a number of relevant information in order to effectively cope with the conundrum of salary determination. Notwithstanding, this investigation does not help companies to determine the importance, worthiness and contribution of each job to the achievement of a business’ objectives. Let alone, such an investigation can turn to be useful to establish a structured and hierarchical order of jobs or a grading structure, and that is exactly why the assessment of each job, i.e. job evaluation, can turn to be particularly useful to provide the basis for a consistent and fair salary structure duly considering the importance and weight of relativities.
Clearly, the introduction of Equal Pay legislation has had a remarkable impact on the need to introduce and design job evaluation techniques within organisations; but the introduction of job evaluation has revealed to be particularly useful also during organisations’ restructuring procedures like mergers and acquisitions.
Also in these kinds of circumstances, nonetheless, employers should be aware of the importance of effectively, openly, clearly and constantly communicate with their staff. As warned by Torrington et al (2008), in fact, the failure of this approach can also depends on lack of communication. This is what actually happened in 2002 when the local career services of Coventry , Solihull and Warwickshire merged into the Coventry , Solihull and Warwickshire Partnership (CSWP). According to the new payment system devised during the restructuring plan, formed by 18 grades and 66 steps, the majority of employees concerned would have received a higher salary and a pay rise of 3.5% upon acceptance of the deal. However, since trade unions’ (UNISON) representatives were unhappy with some details of the new pay terms and conditions proposed by the new partnership, they refused to support the vote in favour of the new package. So that, when the new package was balloted in 2003 it was overwhelmingly rejected. After two years of negotiations, during which senior managers also consulted with staff and gave employees the opportunity to express their views, the new terms and conditions, despite some concessions were made, were finally accepted, mostly thanks to the communication channel opened by the Partnership with its staff (Torrington et al., 2008).
Also in these kinds of circumstances, nonetheless, employers should be aware of the importance of effectively, openly, clearly and constantly communicate with their staff. As warned by Torrington et al (2008), in fact, the failure of this approach can also depends on lack of communication. This is what actually happened in 2002 when the local career services of
As it clearly emerges from this example, but the rule also applies in general, job evaluation does not mean that, where recognised, collective bargaining with trade unions is suppressed. It just takes to recall what job evaluation is for, i.e. determining differential gaps between the different levels of salary and not the salary itself.
This point is clearly expressed by ACAS (2005) which points out that “job evaluation does not determine actual pay”, which is and remains a separate activity resting on managers and employers or their trade unions representatives.
What clearly job evaluation is not is a means to determine pay levels and annual rise and let alone pay at risk components of reward, such as bonuses and incentives (Torrington et al., 2008).
Job evaluation is neither concerned with the determination of the volume of work each job requires, nor can it help to the rightsizing process of departments or units within an organisation, nor can it help to plan work scheduling (ACAS, 2005).
Pros
Nonetheless, it can be said that there are a number of arguments in favour of job evaluation, in particular the approach can turn to be particularly useful when setting a new, or reviewing an existent, pay grading structure. Additionally, this technique helps employers to build and gain internal credibility in terms of salary fairness and equity, ultimately making the overall pay system more defensible.
The existence of a grading system within an organisation can also enable employers to promptly and relatively easily introduce new salary grades within the existing rank in case some new kinds of jobs should be introduced within the business. Having a structured pay grade system within the firm will surely turn to be useful also when resorting to external comparisons, making it easier to match internal with external jobs and ensure that the grade attributed to each job consistently and reliably reflects the importance attached to each of them.
Job evaluation can also help organisations to sensibly reduce the number of disputes and grievances based on salary claims (ACAS, 2005). Employers should also consider as a wake-up call the eventual increased number of claims received on alleged salary inequalities, in that this could means that their grading structure might no longer be adequate and appropriate. In this case, job evaluation, helping organisations to settle the issue, could also enable employers to re-establish trust and confidence in their pay systems, ultimately increasing motivation amongst staff.
The introduction of a new technological system and the consequent change of the way job is approached and carried out within an organisation, which can also implies a rebalancing of the use of physical and mental efforts carried out by staff, can require a new review and assessment of the jobs concerned. This definitely is another case in which job evaluation could reveal to be particularly useful.
Actually, it is very interesting what ACAS (2005) points out with reference to the broader benefits which job evaluation can bring to an organisation, namely the opportunity to review its recruitment and training policies, its structure and its working methods.
Not least, job evaluation can, indeed, also help organisations to tackle and settle organisational issues linked to roles duplication and gaps, which can enable employers to save a lot of money and improve efficiency.
As suggested by Armstrong (2006), one of the strongest benefits of job evaluation is represented by the circumstance that it can be aligned to organisations’ values system and competency frameworks. As such job evaluation allows firms to reinforce values behind them and contribute to foster integrity.
Cons
On the other hand opponents of job evaluation accuse the system of being inflexible, bureaucratic and out of date.
Additionally, inconveniences usually associated with job evaluation are linked to its approach: “systematic rather than scientific”, accounting for the system not being completely bullet proof in that based on human judgment, although provided by experienced and competent people (Torrington et al., 2008).
Someone goes even further afield, adding that job evaluation systems can also be manipulated by people in charge of their design and implementation. Actually, also bias and personal judgement can have a considerable, negative impact (Armstrong, 2006).
In order to avoid these collateral effects, which can influence the equity of a job evaluation approach, a “felt-fair” test can be used, i.e. a sort of tool enabling businesses to evaluate the acceptability of job assessments and reviews.
All of these kinds of criticisms, however, clearly refer to the risks associated with the way job reviews are carried out but not with the job evaluation idea and the method itself. Misuse and manipulation, unfortunately, are not just typical of job evaluation, many other management tools, in fact, despite their unquestionable usefulness and effectiveness, are prone to manipulation.
All of these kinds of criticisms, however, clearly refer to the risks associated with the way job reviews are carried out but not with the job evaluation idea and the method itself. Misuse and manipulation, unfortunately, are not just typical of job evaluation, many other management tools, in fact, despite their unquestionable usefulness and effectiveness, are prone to manipulation.
Nielsen (2002) criticises the circumstance that this technique does not consider the growing relevance of external comparisons and relativities which, instead, to his appreciation, is what matters the most. Actually, as wisely argued by Armstrong (2006), considering the scope of job evaluation, i.e. ranking jobs in a structured way and not establishing the amount of money to be paid to job holders, this criticism immediately falls short of meaning.
Another particular and, indeed, expensive-to-settle issue linked to job evaluation, is represented by the very likely possibility that, during its implementation, it could emerge that some people within the organisations are actually incorrectly paid.
In general employers could be prompted to face two different situations, either individuals are receiving more than they should, or they are receiving less. Whatever the case, emerging issues are typified by the characteristic that the easier the problem is to set, the higher costs are associated with its settlement. More specifically, if following a job evaluation some individuals will result to be underpaid it will be absolutely straightforward to promptly increase their salary accordingly (in one go or step by step). The problem is that, for easy it might be doing so, the move will surely turn to be costly for an organisation, in that it implies an immediate overheads increase to which the organisation is not, very likely, prepared. Some budget adjustment will also be obviously required.
On the other hand of it, following a job evaluation procedure, some employees could result to be overpaid, in this case employers should “red-circling” the job position(s) concerned in their chart meaning that, although the current job holder will continue to earn that given amount of money, individuals who will occupy that position in the future will receive the correct, revised salary level.
But this is not obviously all, as suggested by Armstrong et al. (2008) in such cases employers cannot really promptly adjust, reducing it, the salary earned by the people concerned, in that it would clearly represent a breach of their contract of employment. They can just either continue to pay the higher level of salary, not granting further salary increases until the individuals’ salary has achieved its right level or agree with employees concerned to pay them a lump sum (in general a large amount of money) in order to consequently legally change, i.e. reduce, their pay level to the correct salary rate identified by means of job evaluation.
Devising a job evaluation system and developing all the activities usually associated with it, definitely requires time and resources and very often the length of time from its introduction to its actual coming into operation is rather considerable.
Devising a job evaluation system and developing all the activities usually associated with it, definitely requires time and resources and very often the length of time from its introduction to its actual coming into operation is rather considerable.
Additionally, the effectiveness of any job evaluation activity has a validity usually not going beyond the mid run, (at best 3 years); so that the system usually requires a relevant degree of “maintenance” in order to be kept up-to-date.
It could be agreed with Edgel (2010) that the pace at which organisations change and employers introduce new jobs and roles within their businesses could pose some real threats to the future of this technique, at least as it presently stands. The positive effects produced by this approach compared to the length of time they can be considered valid might account for considering this technique unwieldy.
The opportunity to resort to this approach clearly also depends on the size and complexity of organisations. In particular, big corporations, where jobs are changed regularly and technology advances have a relevant impact, could find it difficult to set and, most of all, to maintain such a system; whilst small businesses could find it easier to resort to simpler approaches. It clearly depends on the circumstances.
Nonetheless, possibly on account of the increasing relevance and importance the subject of compensation and reward has acquired within any organisation and of the dispute risks associated with it, the use of this technique has reportedly (Thompson and Milsome 2001, IDS 2003, CIPD 2004 and 2007) registered a steady growing trend in the last decade in the UK.
So that, at least at the moment, it might seem to still making sense the dictum according to which “job evaluation is the one management tool that refuses to go out of fashion”.
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