1. JOB EVALUATION
One of the main tasks associated with the administration of weekly or monthly salary payments is setting the differential gaps. It is necessary always to juggle the three factors of performance, market rate and equity. It is rarely possible or wise to pay people only according to their performance or contribution, and linking payment only to developments in the labour market can make working relationships very difficult. There is always the vexed question of how much more than Y and how much less than Z should X receive? The relative contribution of each individual of the three is difficult to measure, so some acceptable assessment of each job is made. The difficult problem of assessing performance is overlaid with the even more difficult problem of making comparisons.
The best-established way of tackling this problem is to use a form of job evaluation, a technique which appears to be used by more and more UK employers each year. Steady growth was reported during the 1990s despite the approach being criticised by advocates of greater flexibility in pay determination (IRS 1998). Large-scale surveys (see Thompson and Milsome 2001; IDS 2003a; CIPD 2004 and 2007) confirm the continuation of this trend in more recent years, also providing evidence of further likely take-up in the future. Much of the recent growth has been in the public sector, local authorities and the NHS being examples of major employers establishing new schemes in recent years, but the surveys suggest that job evaluation is very widely used in the private sector as well. Moreover, few organisations abandon it, once introduced. The maxim that ‘job evaluation is the one management tool that refuses to go out of fashion’ thus continues to hold true.
Job evaluation is the most common method used to compare the relative values of different jobs in order to provide the basis for a rational pay structure. Among the many definitions is this one from ACAS:
Job evaluation is concerned with assessing the relative demands of different jobs within an organization. Its usual purpose is to provide a basis for relating differences in rates of pay to different in-job requirements. It is therefore a tool which can be used to help in the determination of a pay structure. (ACAS 1984)
It is a well-established technique, having been developed in all its most common forms by the 1920s. In recent years it has received a series of boosts. First, various types of incomes policy between 1965 and 1974 either encouraged the introduction of job evaluation or specifically permitted expenditure above the prevailing norm by companies wishing to introduce it. In the 1980s the use of job evaluation became the hinge of most equal pay cases. More recently organisations have found it useful as part of moves towards single-status contractual arrangements and resolving pay issues following organisational mergers.
Despite its popularity it is often misunderstood, so the following points have to be made:
- Job evaluation is concerned with the job and not the performance of the individual job-holder. Individual merit is not assessed.
- The technique is systematic rather than scientific. It depends on the judgement of people with experience, requiring them to decide in a planned and systematic way, but it does not produce results that are infallible.
- Job evaluation does not eliminate collective bargaining where trade unions are recognised. It determines the differential gaps between incomes; it does not determine pay levels or annual pay rises.
- Only a structure of pay rates is produced. Other elements of earnings, such as premia and incentives, are not determined by the method.
The chief reason for the introduction of job evaluation is to achieve fairness in pay policy and to increase employees’ sense of fairness. It is also commonly used as a tool in organisation restructuring and in harmonising the terms and conditions enjoyed by different groups of employees, for example following a merger or acquisition, or the signing of a single-status agreement with a trade union. Another important reason for the increased use of job evaluation is the need to comply with the Equal Pay Act 1970, as modified in 1984, which places as central in assessing equal pay claims the question of whether or not a job evaluation scheme is in use.
There are many methods of job evaluation in use and they are summarised by Armstrong and Murlis (1998, pp. 81-102), Smith and Nethersall (2000) and IDS (2003a). Where a non-analytical or ‘whole job’ scheme is used a panel of assessors examines each job as a whole, in terms of its difficulty or value to the business, to determine which should be ranked more highly than others. No attempt is made to break each job down into its constituent parts. By contrast, an analytical scheme requires each element or factor of the job to be assessed. Since 1988 it has been the practice of courts only to accept the results of analytical schemes in equal pay cases.
The most widely used analytical schemes are based on points-rating systems, under which each job is examined in terms of factors such as skill, effort and responsibility. Each factor is given a weighting indicating its value relative to the others and for each factor there are varying degrees. A score is then given depending on how demanding the job is in terms of each factor, with the overall points value determining the relative worth of each job – and hence its grade in the organisation’s pay structure.
Traditionally the analysis was carried out by a panel of managers and workforce representatives examining each job description in turn and comparing it, factor by factor, against grading definitions. In recent years there has been increased interest in computer-assisted job evaluation systems which award scores to each job on the basis of information gathered from job analysis questionnaires.
A well-known set of factors, weightings and degrees was devised for the National Electrical Manufacturers Association of the United States, but the International Labour Organisation has produced a list of the factors used most frequently (see table below). It would be unusual for more than a dozen of these to be used in any one scheme, most taking account of six to ten different factors.
The points values eventually derived for each job can be plotted on a graph or simply listed from the highest to the lowest to indicate the ranking. Then – and only then – are points ratings matched with cash amounts, as decisions are made on which points ranges equate with various pay grades. This process is illustrated in Figure 27.3, each cross representing a job. The most common approach involves using a graph on which one axis represents the current salary for each job evaluated and the other the number of job evaluation points awarded. A line of best fit is then drawn and each job assigned to a grade. Salary-modelling software is widely available to help with this process.
It is virtually inevitable that some jobs will be found to be paid incorrectly after job evaluation has been completed. If the evaluation says that the pay rate should be higher then the rate duly rises, either immediately or step by step, to the new level. The only problem is finding the money, and introducing job evaluation always costs money. More difficult is the situation where evaluation shows the employee to be overpaid. It is not feasible to reduce the pay of the job-holder without breaching the contract of employment. There have been two approaches. The first, which was never widespread and appears almost to have disappeared, is buying out. The overpaid employee is offered a large lump sum in consideration of the fact of henceforth being paid at the new, lower rate. The second and more general device used is that of the personal rate or red-circling. An example could be where the rate for the job would be circled in red on the salary administrator’s records to show that the employee should continue at the present level while remaining in that post, but a successor would be paid at the lower job-evaluated rate.
A widely used proprietary scheme is the Hay Guide Chart-Profile Method (E-reward 2003), which is particularly appropriate for the evaluation of management jobs. The method is based on an assessment of four factors; know-how, problem solving, accountability and working conditions. Jobs are assessed by using each of three guide charts, one for each factor. A profile is then developed for the job showing the relationship between the factors, a ranking is eventually produced and the rates of pay of the jobs considered in order to produce a new pay structure. At this stage comes one of the greatest advantages of this system. The proprietors have available a vast amount of comparative pay data on different undertakings using their system, so their clients not only can compare rates of pay within their organisation (differentials and internal relativities) but also can examine their external relativities. This and other proprietary systems developed by firms of consultants are described by Armstrong and Murlis (1998, pp. 602-15) and by IDS (2000).
2. EMPLOYEE PARTICIPATION IN JOB EVALUATION
The degree of participation by non-managerial employees in job evaluation varies from one business to another. In some cases the entire operation is conducted from start to finish without any employee participation at all. Some degree of participation is more common and is sensible if acceptance of a new scheme is to be gained. Apart from negotiating on pay levels and bargaining units, the main opportunities for employee contribution are discussed below.
2.1. Job families
Employees collectively need to consent to the family structure and they can probably add to the deliberations of managers about what that structure should be, as they will be well aware of the sensitive points of comparison.
2.2. Job descriptions
Traditionally job descriptions have been crucial to the evaluation and it is common for job-holders to prepare their own, using a pro-forma outline, or for supervisors to prepare them for jobs for which they are responsible. Superficially, this is an attractive method, as there is direct involvement of the employee, who cannot claim to have been misrepresented. Also, it delegates the task of writing job descriptions, enabling it to be completed more quickly. The drawback is similar to that of character references in selection. Some employees write good descriptions and some write bad ones: some overstate while others understate. Inconsistency in job descriptions makes consistency in evaluation difficult.
An alternative is for job descriptions to be compiled by job analysts after questioning employees and their supervisors, who subsequently initial the job description which the analyst produces, attesting to its accuracy.
2.3. Panel evaluation
The awarding of points is usually done by a panel of people who represent between them the interests and expertise of management and employees. This is not only being ‘democratic’, it is acknowledging the need for the experience and perspective of jobholders as well as managers in arriving at shrewd judgements of relative worth. Naturally, panel memberships alter so that employees are not asked to evaluate their own jobs. Although there is an understandable general tendency for employee representatives to push ratings up, and for management representatives to try to push them down, this usually smooths out because both parties are deriving differential rankings and not pay levels. The only potential conflict of interest will be if employee representatives and managers have divergent objectives on the shape of the eventual pay structure, with big or small differential gaps.
2.4. Job analysis questionnaires
Proprietary, computer-assisted job evaluation methods involve trained analysts putting a series of detailed questions to job-holders from a multiple-choice questionnaire. The results are then fed into a computer which generates a score for each job. There is therefore no need for a panel to reach decisions based on written job descriptions. While there is clearly direct employee involvement in providing answers to the job analysis questionnaire, the absence of a panel including workforce representatives can reduce the level of employee influence on the outcome of the exercise. This is particularly the case with those proprietary schemes which are customised to meet the needs of the purchasing organisation.
Source: Torrington Derek, Hall Laura, Taylor Stephen (2008), Human Resource Management, Ft Pr; 7th edition.