Job Evaluation

Presented By:

Ajit Kumar Kar

Job Evaluation

• Process to evaluate job to see relative worth or importance of job.

• Job evaluation is evaluation or rating of jobs to determine their position in job hierarchy.

• Job Evaluation process is basis for compensation management System.

• Helps in estimating Basic pay• Once basic pay is determined , Reward,

incentive and benefits are also determined

Why Bother??• The Job Analysis provides the

foundation for almost everything HR is involved in.– Job Descriptions– Employee Selection– Training– Performance Appraisals– Job Classification– Job Evaluation– Job Design

Sources of Job Information

• SMEs (Subject Matter Experts)– people who have in-depth knowledge of

specific job under analysis, job skills, and abilities

– Job Incumbent– Supervisors– Job Analyst

Methods of Job Analysis

• Interviews

• Structured Questionnaire / Inventory

• Direct Observation

• Logbooks / Work Diaries

Objectives Of Job Evaluation

• Determines place & position of a job (Ranks Job)

• Clarify responsibility & authority.

• Avoid any discrimination against wage administration.

• To ensure employee satisfaction for compensation

• To provide basis for classification of new or changed jobs.

• To manage internal (Different jobs in organization) & external ( According to market rate) consistency in compensation

• To maintain accurate data.

Principles Of Job Evaluation

• Job Dimensions or factors (Knowledge, Skills, Experience, Responsibility, Working Condition) have to be properly selected & rated according to importance.

• Factors should be clearly defined to employees.

• The evaluation program should be explained to all.

• Employees must be actively involved in Job Evaluation Program.

• Market factors should be taken into consideration whole evaluation of jobs– E.g. If there is scarcity of jobs, such job

should be given importance.

Universal Compensable Factors

• Skill: the experience, training, ability, and education required to perform a job under consideration

Universal Factor - Skill

• Technical Know-how• Specialized Knowledge• Organizational Awareness• Educational Levels• Specialized Training• Years of Experience Required• Interpersonal Skills• Degree of Supervisory Skills

Universal Compensable Factors

• Effort: the measurement of the physical or mental exertion needed for performance of a job

Universal Factor - Effort

• Diversity of Tasks

• Complexity of Tasks

• Creativity of Thinking

• Analytical Problem Solving

• Physical Application of Skills

• Degree of Assistance Available

Universal Compensable Factors

• Responsibility: the extent to which an employer depends on the employee to perform the job as expected, with emphasis on the importance of job obligation.

Universal Factor - Responsibility

• Decision-making Authority

• Scope of the organization under control

• Scope of the organization impacted

• Degree of integration of work with others

• Impact of failure or risk of job

• Ability to perform tasks without supervision

Universal Compensable Factors

Working Conditions:

• hazards• physical

surroundingsof the job.

Universal Factor - Working Conditions

• Potential Hazards Inherent in Job• Degree of Danger Which Can be

Exposed to Others• Impact of Specialized Motor or

Concentration Skills• Degree of Discomfort, Exposure, or

Dirtiness in Doing Job

Process Of Job Evaluation

– Gaining acceptance of process – Selecting key jobs for evaluation – Job Description & Job Specification – Selection of evaluation method– Job rating – Assignment of money value to job – Implementation of process – Periodic review– Evaluation & Feedback

Techniques Of Job Evaluation

• Non-Quantitative Techniques (2 Types) :

Ranking : – Rank is given to different Jobs– Simplest, Quick, Inexpensive, good For

small Organization– Based on brief Job description– Based on commonsense, guess– Don’t have concrete basis– Job specification is not considered– This method ranks job but does not tell

difference between the 2 jobs.

• 3 Techniques of Ranking :

– Relative ranking•A key job is determined & other jobs are

ranked after comparing it with the key job

– Paired comparison•Each job is compared with other job and

then Jobs are ranked– Single Factor ranking

•Single most important factor of job is identified & compared with Single most important factor of other job

Job Classification Or Job Grading

• Simple, inexpensive• Jobs are graded• Grades are formed on the basis of

– Nature of task/responsibility– Authority associated with job– KSA required

• A single grade can be given to different jobs in organization at a same level

• E.g. “A” grade to jobs of Financial Accountant, Cost Accountant, management Accountant

• Steps :– Analyzing Organization Hierarchy– Determining different dimensions of job– Defining Grades as Grade l, Grade ll on the

basis of Job dimension & Organization Hierarchy

– Classifying jobs under different Grade– Assigning Monetary value to different

grades

Quantitative Techniques

• Point Rating Method :– Widely used, accurate, dependable– Different scales for different jobs

• All managerial jobs : on One scale• All operational jobs : on Second scale• All clerical jobs : on third scale

– Wage differentials are systematic – Wage Differentials : Difference in wages paid for

same or similar work due to different reasons

• Different Steps are– Determine job factors or compensable

factors (KSA, Effort, Responsibility)– Determine sub-factors

• Effort : Mental Effort, Physical Effort• Responsibility : Towards Organization, Towards Co-

workers, Towards Customers

– Define Degree statement or Profile Statement• Describe requirements of each sub-factors• There are normally up to 5 degrees associated with each

Sub-factor

Degree1 Degree2 Degree 3 Degree 4 Degree 5

Experience less than

6 months 6 to 1 yr 1-2 yr 2-3 yr 3yr & more

Points 20 40 60 80 100

• Assign points to factors, sub-factors & degree

• Preparation of chart• Applying the point system

– Points helps in determining the pay scale of each job

Factor Comparison method

• Determine factors (between 4 to 7 factors across different jobs)– Hourly pay, mental requirement, Physical

requirement, Responsibility, Working conditions

• Identify Key jobs or bench mark jobs – Secretary (Benchmark job) : Receptionist,

stenographer (similar jobs)

• Factor of each benchmark job is compared & ranked– If for secretary if Hourly pay is 8.65 , it will be

distributed among different factors on the basis of importance

• Factors are assigned monetary value

Decision Band Method

• In this value of job depends on decision making requirements

• In all jobs incumbents has to make some kind of decision.

• DBM distinguishes 6 level of decision making or “ Decision bands”

Advantages Of job Evaluation• Logical & Objective method of Ranking Jobs.• Makes Wage Administration simpler• Facilitates entry of new jobs in organizational

Wage structure.– If Job maintenance electrician is benchmark

job, so when new job comes for a computer maintenance electrician, Factors, points , wage can be easily determined on the basis of benchmark jobs.

• Helps in Comparing Organizational wage structure with competitor’s.

• Information Collected For Job Evaluation can be used for Selection, Transfer, Promotion of employees

Limitations Of job Evaluation• Changing Technology brings changes in jobs

and these changes makes Job Evaluation technique outdated.

• If not properly implemented, it may give rise to grievances

• J E brings rigidity in pay system.– In J E scale 4 scales are there : 10,000, 15000,

20000, 25000.– If a new employee joins and deserves at least

12000– But cannot be given as in JE scale 10000 is fixed

for a new employee.

• Time taking• Compromise by JE committees due to different

interests groups (Management, Unions)

Concept Of wage & salary Administration

Concept Of wage & salary Administration

• Basic wages & salaries are defined as Hourly, weekly, Monthly pay.

• Total compensation (incentives, benefits) is calculated, once basic wage/salary is fixed.

• Compensation should be– Fair– Maintain principle of Equity– Match employee expectancy

Purpose of wage & salary Administration

• Attracting talented Resources• Retaining & motivating Employees• Financial Management

– If compensation is rational, it will reduce employee turnover

• Legal Requirements

Concept of Different Wages

• Minimum wages– Fixed by Government, Enforced by Law– Sufficient wage top fulfill minimum existence– Applicable to all workers & governed by Minimum

Wage act, 1948– Based on 6 Norms

• While calculating Min wage it should be considered that 3 persons are dependent on one earner

• Minimum Food requirements• Clothing (4 people), House rent ( Government Housing

Scheme)• Fuel, lightening, other items( 20 % of min wage)• Children education, medical requirement, provision for

old age/marriage (25 % of min wage)

• Fair wages– Higher than minimum wage– Less than Living wage– According to profit of company– According to increase in production– Paid according to financial capacity of

employer/Organization.

• Living Wages– Highest in Value– Not only bare essentials of Food, Cloth, Shelter– But also,

• Education of children• Protection against ill-health.• Requirements of social needs, like marriage.• Insurance against old age.

Basic wage Plan• Time Wage Plan

– Paid for no. of hours– Earn more for overtime

• Piece Wage Plan– Paid on the Basis of no. Of products manufactured– Disadvantage : Go Slow (As productivity per worker

increases workers adopt this strategy to prevent management for laying off workers), Quality can be compromised.

• Payment By Results– Wage for each piece of work is fixed– Paid once work is completed– E.g. Decoration of function hall

• Skill Based Pay– Paid on the basis of no. of skills possess, expertise

• Competency Based Pay– On the basis of KSA of individuals.

Broad Banding

• Method of grouping jobs with similar duties, responsibilities and determining pay that makes compensation system more flexible.

• Broad banding reduces no. of salary levels• Evolved as organization want to flatten their

hierarchies• It has fixed minimum and maximum level, which

overlaps with each other.• If salary band for entry level is 10,000- 18,000

then salary band for next level can be 12,500-22000

• Traditional Narrow band, salary band for entry level will be 10000-12000 & for next level : 12500-14500

Advantages

• Gives manager a free hand to fix the pay of individual workers

• It reduces employee resistance to being shifted laterally in organization

• Helps organization to avoid unnecessary distinction based on level or status

Variable compensation

• Designed to pay in accordance with performance not in accordance with position.

• Some plans are– Production incentives, profit sharing– Gain sharing, Bonus

• Variable plans are paid at different levels– Worker level (Piece rate, Time rate)– Manager Level (Creative ideas, achievement of

target)– Group level (Reward to whole group)

Executive compensation

• To attract and retain chief executives• Criticism : Huge pay package for executives

when company is not doing well

• Effective Executive compensation Plan:– Linked with organizational objectives– Restrictive stock option Plan : An employee will be

given right to buy shares but not possession of them till certain requirements are met

– Plan should be transparent • Should be made known to all stakeholders

Wage Differentials

• Difference in wages paid for same or similar work due to different reasons

– Work schedule, Knowledge, experience, Organization capacity. Different business trend( IT employees are paid more), different country

National wage Policy

• Focus to remove discrimination in wage and salary levels

• In India, due to diversity across different regions, it is not possible to have a common national wage policy.

• Wage fixation depends on no. of criteria's– Local conditions– Cost of living– Paying capacity (Organization, industry, state)– There is regional minimum wage , that is revised

regularly and it is linked with cost of living

Theories/Surveys For wage & salary Administration

Theories• Minimum wage theory• Bargaining theory of wages

– Bargaining power determines wage fixations

Surveys• Working class family income & Expenditure Survey

– Helps to analyze income & expenditure data to design center –specific report (state Wise)

– Enables to revise Consumer Price index numbers

• Occupational Wage survey, Contract labor Survey, Survey of labor conditions, Annual survey of industries

Wage fixing Institutions & Authorities

• Most wage Fixation is done by– Collective Bargaining & Negotiation– Some Government Authorities (pay Commissions

& Wage Boards) determines

– Pay Commission : A temporary commission is set up, generally in 5 years (Neutral)

– Earlier there was Wage –Board (Tripartite)

Rewards

• Extrinsic : Promotion, Bonus

• Intrinsic : Challenging Assignments, Recognition

Monetary (Bonus, Incentives)

Non- Monetary : Club Memberships

Incentives : ESOP, Annual Performance Incentives

Benefits : Memberships , scholarship for children, Reimbursement of Medical Expenses, pain vacation

Types of Incentive Plans

• Short Term Plans : Employee performance for short period (day, week, month)– Halsey plan– Rowan Plan– Barth System of Wages– Task- Bonus System– Point –Rating System– Progressive Bonus

– Halsey plan

• This plan tries to combine the merits of time and piece rate systems and eliminate their limitations.

• A certain amount of work is fixed as a standard output, which is to be completed in a prescribed time.

• If completes work before prescribed time employee gets percentage of wages as extra earnings.

• E.g. A worker completes the work in 6 hours, where prescribed time is 8 hours and hourly rate is Rs.5

• Plan percentage of wages ( for those 2 hours) be fixed at 50%

• Extra wage worker has received is = Plan percentage * Time saved * Hourly Rate

•½ * 2 * 5 = Rs. 5 (He will get Rs.5 for those 2 hours)

•Worker eventually earns = Rs.35

– Rowan Plan•Worker is guaranteed a minimum wage

on time basis.•A standard time is fixed.• If worker completes it before time, he

earns more for the time saved.

•Extra earnings of worker = Time saved * Time taken * Hourly Rate /Standard Time

•= (2*6*5)/8 = 7.50•Total earning = 30 + 7 . 50 = 37.50

– Barth System of Wages•Not guarantee of a minimum rate•Not guarantee any wage for Time Saved.•Wages =

Standard Time * Time Taken * Hourly Rate

= 8 * 6 * 5 = 6.9 *5 = 34.5

– Task- Bonus System•Used for groups•Emphasize on team work and co-

ordination•Here, task of each group member is pre-

determined and he has to achieve it to earn a Bonus above his standard pay.

Using Gantt Method

A bonus is paid over and above Time Wage (No. of hours worked)

Using Taylor Method

The rate of piece wage is raised once task is accomplished

– Point –Rating System• Job is rated in terms of a standard time.•After the end of specified time, day or

week the output is assessed.•Organization fix its standard time value

as 10 units of production per hour•Let no. of working hour per day is 8 and

hourly rate is Rs.5•At the end of day worker produces 100

Units i.e. equivalent to 10 hours of production as per standard time value

•Worker is paid Rs. 50 @ Rs. 5 /hr.

– Progressive Bonus• In this system of incentive payment, earnings

increase at a progressive rate once the output crosses the minimum or standard output.

• Payment of bonus starts at a specified level of output say 75% of the standard output.

•A minimum or standard output is fixed• If able to achieve 75% of output- Receive

Bonus•Worker who produce above this level are

paid bonus, which increases slowly at first then rapidly .

•Worker who do not achieve minimum output are paid daily wages at hourly rate.

Long term plans

Employee performance for a long period• Annual Bonus• Profit-Sharing Plan

– Distribution Plan– Deferred Plan– Combination Plan

• Gain – Sharing• Employee Stock plans

– Employee Stock Purchase Plan : • Acquire share but cannot sell as shares are in lock-in-

period

– Restricted Stock plan– Employee Stock Option scheme:

• Option to acquire share at future dates.

– Stock Appreciation Rights– Phantom Stock

• Protects holder against any depriciation in value of stock

– Premium Priced Options

Non-Monetary Incentives

• Recognition• A challenging Assignment• Additional Responsibility• Free gifts, Free Vacations• Awards for Exceptional

performance

Guidelines For Effective Incentive Plans

• Linked with employee performance

• Communicated to all.• Employees suggestions

should be valued• Include monetary & non-

monetary incentives

• Possible to measure value of non-monetary plans

• Incentive plan should be flexible• Should minimally affected by external

factors like stock market performance & industry performance

Employee Benefits

Employee Benefits• Free & subsidized lunch• Medical facility• Pain Holiday /vacation• LTA (Leave travel

Allowance)– Travel cost is covered,

Entire cost is not covered

• Retiral Benefits : PF Gratuity, Pension

• Employee Insurance• Educational

allowances, Merit scholarships

• Subsidized Quarters• Transportation facility

Recreational facilities

Get credit card at subsidized fee

Tax Assistance

Interest free loanCafeteria, rest roomsStudy LeaveCompany Sponsored StudyClub MembershipMaternity LeaveChildcare Centers

History & Evolution of Employee Benefits

• Ahmedabad based Calico Mills started: Medical Benefits

• Tata : Medical Unit• Delhi Cloth Mills : Housing schemes• Indian Parliament passed may law

– Gratuity act, bonus Act, factories act, etc

• Trade Union became stronger

Modern Concepts in Employee Benefits

• Golden parachute– Provided to Top Executives when company

is taken over by another firm resulting in loss of job

– If job is terminated due to merger, acquisition employee will receive large benefits in form of cash bonus, stock options

– Cash Bonus, Stock Options, Continuation of the salary, Retirement benefits

• Severance payments– Offered to employees who retire or give

resignation– Can be given to employees who are fired– Stock options– Retirement benefits– Assistance in searching new jobs– Medical, dental , life insurance– Payment for unused vacation & Sick Leave– Payment based on years of service

• Cafeteria Benefit Plan– Employee are given choice in selecting most suitable

schemes– Employee chooses benefits that best fits their needs