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HR Basics: Job Evaluation 2e

HR Basics is a series of short courses, designed to highlight what you need to know about a particular human resource management topic. In today’s HR Basics, we define Job Evaluation, discuss the importance of evaluation in developing base pay structures, and explore the methods of evaluation for determining the value of jobs in an organization. Job evaluation is the systematic process of determining the relative worth of jobs. The outcome of job evaluation is the development of pay structure. Organizations want their employees to perceive that they are being paid fairly in relation to pay for jobs performed by others within the organization, as well as individuals performing similar jobs in other organizations. Job evaluation allows organizations to appropriately value jobs to build a pay structure through various methods of evaluation. Job evaluation provides the foundation to design base pay structures. Building a base pay structure is the process by which we create a pay structure. When establishing a pay structure, organizations use pay grades, which are groupings of individual jobs that have approximately the same value to the organization. The two general approaches for valuing jobs are job evaluation and market pricing. There are two major schools of job evaluation: market-driven systems and Job evaluation (known as job-worth) systems. Each yield different results. Employers can adopt one of several alternate methods. Market pricing methods have an external focus while Job evaluation methods have an internal focus. A base pay structure is developed using the compensation philosophy and job analysis to drive job evaluation decisions. The results of job evaluation are used to design pay structures, including pay grades and pay ranges. Job evaluation looks at pay levels within the company, and market pricing looks outside the company. Both types of methods use relative comparisons to determine the worth of jobs in an organization. Job evaluation provides the basis for accurate valuation of jobs and the creation of appropriate pay structures.