Introduction to Job Evaluation

Overview
Job evaluation is a formal process for determining the relative value of jobs based on job
content, with emphasis on such factors as skill, effort, responsibility and working
conditions. Job evaluation may contrast with or complement market pricing, which uses
the labor market to set the worth of jobs. A key benefit of market pricing is its emphasis
on external competitiveness; however, a big drawback is insufficient and/or unreliable
market data for all the jobs in the organization. Accordingly, job evaluation in some
formeven a simple one, such as slottingis needed to supplement a market pricing
approach to the valuation of work. A key benefit of job content evaluation is internal
consistency. Another is utilityall jobs can be evaluated based on content. Organizations
use job evaluation to:

• Ensure compliance with legal requirements, including federal laws and

regulations on equal pay and state/provincial or local ordinances on comparable
worth.
• Establish a rational, consistent job structure based on value to the organization in
terms of each job's complexity, importance and/or other factors (with or without
reference to market valuation).
• Help provide a basis for pay-for-performance.
• Assist in establishing pay rates and structures that are competitive.

Contrary to popular belief, some job evaluation systems are intrinsically linked to or
validated by the market. However, market sensitivity is sometimes a problem with job
evaluation. Solutions include pay setting flexibility for new hires and special pay
programs, often called "market rates" or "special rates."

The market and content approaches to the valuation of work both require work analysis.
Work analysis for the market pricing approach is relatively quick and elementary. Work
analysis in the content evaluation approach takes longer and is more involved in most
cases. In the job content evaluation approach to valuing work, the evaluator determines
the relative value of job content by applying a job evaluation system. The process for
evaluating each job may be very complex and time-consuming (for example, rating the
job on 187 items of the Position Analysis Questionnaire, PAQ), moderately complex
(assessing job elements against evaluation factors using the Factor Evaluation System,
FES, or one of its many clones) or very simple (ranking one whole job against another).
Likewise, the job evaluation system itself may be technically complex and hard to
explain (factor analysis used to empirically derive the job dimensions and standard
equation no. 2 of the PAQ), moderately complex (regression analysis used to weight
factors in the FES or other point-factor systems) or very simple (using the paired
comparison technique to rank-order the benchmarks against which all other jobs in the
organization are slotted).

In addition, most organizations should employ a robust management-employee

communications program to keep everyone informed. Consistent with the universal steps,
typical system-specific steps for a quantitative approach to job evaluation (point-factor
methodology in this example) are:

1. Select compensable factors.

2. Define degrees for each factor.

3. Determine values (weights) for factors and degrees.

4. Apply these criteria to each job to derive points on each factor and obtain a point total.

5. Allocate each job to a grade (range of points) or exact position in the hierarchy based
on total points.

Typical system-specific steps for a non-quantitative approach to job evaluation (whole

job ranking methodology in this example) are:

1. Identify and briefly describe the benchmarks (jobs identified as key based on employee
count, importance to the organization and other considerations).

2. Rank order them into a hierarchy through paired comparisons (which job in each
comparison is "better" than the other overall?).

3. Slot the remaining jobs by comparing each to the rank-ordered benchmarks.

Slotting then becomes the operational method by which new jobs are evaluated. Slotting
can also be used to supplement, or as an alternative to, an established quantitative
approach by comparing critical job elements of the job to be slotted to those of jobs
already allocated to the organization's job worth hierarchy.

However the organization's job worth hierarchy is established, job evaluators continue to
use job content to place value on new and changed jobs. Some organizations use market
pricing as a check on job evaluation. Pay rates in organizations using the job content
evaluation approach to the valuation of jobs are set by reference to the market, collective
bargaining or other means.

Considerations and Closing

Key considerations for organizations contemplating job evaluation are:

Will job evaluation provide substantial benefits to the organization?

Which method/system should be used?

Should more than one method/system be used; for example, one for exempt, salaried jobs
and another for nonexempt, white-collar jobs?

Will the organization apply the system(s) equitably?

Will the organization commit the resources needed to develop, implement and operate the
system(s) over time?

Job evaluation is useful for many reasons. It can serve an organization well. Persons
needing more information about job evaluation as a means to valuing work should
consider the references below.

Wage vs Salary

The difference between wage and salary defines more than how much you end up making
per year. We use the terms to often describe differences in types of work, as well as what
is actually counted in the final total.

Wages are generally paid per hour. This means that you have to be present and working
in order to get paid. Most of the time, wage jobs are not as inclusive when it comes to
things like paid vacations, or paid sick days. Wage earners often have to give up pay for
leaving early, coming in late, missing a day, or taking a vacation.

Salary refers to how much you get paid every year. Salary earners rarely have to punch a
time clock, or keep an accurate account of their hours, because they get paid for
performance rather than by the hour. Salaried workers are much more likely to have paid
sick days and paid vacations, and are not docked pay for being late or leaving early from
time to time.

Salary can also be counted in terms other than money. Some companies consider
reimbursement for things like medical insurance as part of your salary. You can even find
some companies blending education and retirement contributions as part of your salary
package.

Historically, we often refer to manual labor jobs as wage jobs, and professional jobs as
salaried positions. Wage earners are more likely to be found in positions with high
turnover, while salaries are often assigned for positions with low turnover.

We express wages as an hourly payment. We express salary as packages. You might find
that you receive a base salary, stock options, retirement, benefits, and bonuses as a salary
package.
Wages are more likely to be added up into additional payments. If you work 50 hours in
one week, you may receive your first 40 hours at the regular pay rate, and the additional
10 hours at 1 ½ times your normal pay rate. Salary earners are not often given the
opportunity to get paid extra for additional hours.

Summary:

1. Wage earners are paid by the hour.

2. Salary earners are paid by the year.

3. Salary earners usually receive paid time when they are not working.

4. Wage earners often have to give up pay for time off.

5. Salaries are often calculated as packages.

6. Wage earners get paid more for working more than 40 hours per week.

7. Salary workers are rarely offered overtime pay.

8. Salaries can contain all kinds of benefits and perks.

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Compensation Packages in Indian Industry

With the technological developments taking place at a higher rate, the salary packages are too
increasing at a much higher rate. Pay packages in India have witnessed an increase of more
than 14% in 2006 over last year’s salary packages. The compensation package comprises of
monetary and non-monetary benefits that includes salary, special allowances, house rent
allowance, travel allowance, mobile allowance, employee stock options, club memberships,
accommodations, retirement benefits and other benefits.

Globalization is being considered as the cause for such salary hikes. The establishment of multi
national companies and privatization has led the Indian industry to witness higher salary
package.

With the immense competition of attracting and retaining talented human resource,
compensation package is the only motivation factor available with the organizations be it Indian
origin organizations or foreign-owned multinationals.

With the high attrition rate organizations are increasing their salary packages to attract and
retain talented human resource. In the race, India has begged first position followed by
Lithuania and China.
Market Research- Salary Surveys

Organizations are conducting market research and purchasing the salary survey reports to
formulate their own compensation strategy most competitive in the existing environment. They also
make sure that it is also as per the industry standards. The salary surveys reports the salary status
and compensation provided by the organization in different industries and as per the job hierarchy
in the organization.

Compensation System

The compensation includes monetary and non-monetary benefits provided to employees in several
forms. Some organizations provide fixed pay with incentives and other benefits and some
organizations offer performance based pay that is variable in nature depending upon the
performance of the employee. In India organizations follow the equal pay concept for jobs having
equal worth to the organizations.

Indian Industry Analysis

Indian industries are aiming for high growth and are looking for talented human resource. For the
purpose they are offering most competitive compensation packages. Besides the monetary and non-
monetary benefits some organizations also offer development benefits such as online degree
programmes or certification courses. Insurance sector has succeeded in increasing the
compensation packages at highest rate followed by Banking and IT sectors.

In Indian industry rate of salary hike also depends on the job position in the organizational
hierarchy. During year 2006 technical and professional skill oriented jobs were offered more salary
hikes than the senior management.

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Objectives of fringe benefits

by Sidhartha Roy on May 24, 2006

in Human Resource Management

OBJECTIVES OF FRINGE BENEFITS

The view point of employers is that fringe benefits form an important part of employee
incentives to obtain their loyalty and retaining them. The important objectives of fringe
benefits are:

1. To create and improve sound industrial relations

2. To boost up employee morale.

3. To motivate the employees by identifying and satisfying their unsatisfied needs.

4. To provide qualitative work environment and work life.

5. To provide security to the employees against social risks like old age benefits and
maternity benefits.
6. To protect the health of the employees and to provide safety to the employees against
accidents.

7. To promote employee’s welfare by providing welfare measures like recreation

facilities.

8. To create a sense of belongingness among employees and to retain them. Hence, fringe
benefits are called golden hand-cuffs.

9. To meet requirements of various legislations relating to fringe benefits.

Need for Extending Benefits to Employees

(i) Rising prices and cost of living has brought about incessant demand for provision of
extra benefit to the employees.

(ii) Employers too have found that fringe benefits present attractive areas of negotiation
when large wage and salary increases are not feasible.

(iii) As organizations have developed ore elaborate fringe benefits programs for their
employees, greater pressure has been placed upon competing organizations to match
these benefits in order to attract and keep employees.

(iv) Recognition that fringe benefits are non-taxable rewards has been major stimulus to
their expansion.

(v) Rapid industrialization, increasingly heavy urbanization and the growth of a

capitalistic economy have made it difficult for most employees to protect themselves
against the adverse impact of these developments. Since it was workers who are
responsible for production, it was held that employers should accept responsibility for
meeting some of the needs of their employees. As a result, some benefits-and-services
programs were adopted by employers

(vi) The growing volume of labor legislation, particularly social security legislation,
made it imperative for employers to share equally with their employees the cost of old
age, survivor and disability benefits.

(vii) The growth and strength of trade unions has substantially influenced the growth of
company benefits and services.

(viii) Labor scarcity and competition for qualified personnel has led to the initiation,
evolution and implementation of a number of compensation plans.

(ix) The management has increasingly realized its responsibility towards its employees
and has come to the conclusion that the benefits of increase in productivity resulting from
increasing industrialization should go, at least partly, to the employees who are
responsible for it, so that they may be protected against the insecurity arising from
unemployment, sickness, injury and old age. Company benefits-and-services programs
are among some of the mechanisms which managers use to supply this security.

Types of fringe benefits

by Sidhartha Roy on January 12, 2007

in Human Resource Management

TYPES OF FRINGE BENEFITS

Organizations provide a variety of fringe benefits. The fringe benefits are classified under
four heads as given here under:

1. For Employment Security :

Benefits under this head include unemployment, insurance, technological adjustment pay,
leave travel pay, overtime pay, level for negotiation, leave for maternity, leave for
grievances, holidays, cost of living bonus, call-back pay, lay-off, retiring rooms, jobs to
the sons/daughters of the employees and the like.

2. For Health Protection:

Benefits under this head include accident insurance, disability insurance, health
insurance, hospitalization, life insurance, medical care, sick benefits, sick leave, etc.

3. For Old Age and Retirement:

Benefits under this category include: deferred income plans, pension, gratuity, provident
fund, old age assistance, old age counseling , medical benefits for retired employees,
traveling concession to retired employees, jobs to sons/daughters of the deceased
employee and the like.

4. For Personnel Identification, Participation and Stimulation:

This category covers the following benefits: anniversary awards, attendance bonus,
canteen, cooperative credit societies, educational facilities, beauty parlor services,
housing, income tax aid, counseling, quality bonus, recreational programs, stress
counseling, safety measures etc.

The fringe benefits are categorized as follows:

a) Payment for Time Not worked: Benefits under this category include: sick leave with
pay, vacation pay, paid rest and relief time, paid lunch periods, grievance time,
bargaining time, travel time etc.

b) Extra Pay for time Worked: This category covers the benefits such as: premium pay,
incentive bonus, shift premium, old age insurance, profit sharing, unemployment
compensation, Christmas bonus, Deewali or Pooja bonus, food cost subsidy, housing
subsidy, recreation.

Employee Security

Physical and job security to the employee should also be provided with a view to
promoting security to the employee and his family members. The benefit of confirmation
of the employee on the job creates a sense of job security. Further a minimum and
continuous wage or salary gives a sense of security to the life.

Retrenchment Compensation:

The Industrial Disputes Act, 1947 provides for the payment of compensation in case of
lay-off and retrenchment. The non-seasonal industrial establishments employing 50 or
more workers have to give one month’s notice or one month’s wages to all the
workers who are retrenched after one year’s continuous service. The compensation is
paid at the rate of 15 days wage for every completed year of service with a maximum of
45 days wage in a year. Workers are eligible for compensation as stated above even in
case of closing down of undertakings.

Lay-off Compensation:

In case of lay-off, employees are entitled to lay-off compensation at the rate to 50% of
the total of the basic wage and dearness allowance for the period of their lay-off except
for weekly holidays. Lay-off compensation can normally be paid up to 45 days in a year.

Safety and Health

Employee’s safety and health should be taken care of in order to protect the employee
against accidents, unhealthy working conditions and to protect worker’s capacity. In
India, the Factories Act, 1948, stipulated certain requirements regarding working
conditions with a view to provide safe working environment. These provisions relate to
cleanliness, disposal of waste and effluents, ventilation and temperature, dust and fume,
artificial humidification, over-crowding, lighting, drinking water, latrine urinals, and
spittoons. Provisions relating to safety measures include fencing of machinery, work on
or near machinery in motion, employment of young persons on dangerous machines,
striking gear and devices for cutting off power, self-acting machines, easing of new
machinery, probation of employment of women and children near cotton openers, hoists
and lifts, lifting machines, chains ropes and lifting tackles, revolving machinery, pressure
plant, floors, excessive weights, protection of eyes, precautions against dangerous fumes,
explosive or inflammable dust, gas etc. Precautions in case of fire, power to require
specifications of defective parts of test of stability, safety of buildings and machinery etc.