Job evaluation is a systematic method by which compensation professionals compare jobs to determine pay rates that are internally equitable and externally competitive. The point method is a widely used technique in which factors that are important to the job are rated numerically.
The job evaluation analyst begins by identifying compensable factors which are common across the jobs being evaluated. These are grouped in categories such as skill, responsibilities, effort and working conditions, each with several subfactors. For example, the “skill” category might be divided into experience, education and ability.
The analyst divides each factor to be used into levels and defines and assigns points to each. For example, he could define the “experience” factor into 5 levels with points distributed as follows: No experience (entry level) = 10 points 1-3 years experience = 30 points 4-6 years experience = 50 points 7-10 years experience = 75 points Over 10 years experience = 100 points
The job evaluation analyst continues defining and assigning points to all the compensable factors, distributing points across the levels as determined by the differences between the levels. For example, for the factor “education” the difference in value between “some high school” and “some college” might be much less than the difference in value between “some college” and an “undergraduate degree,” thus accounting for the point spread. Some high school = 5 points High school graduate = 15 points Some college = 20 points Undergraduate degree = 60 points Graduate degree = 100 points
Once this is done for all the compensable factors to be used, the analyst examines individual jobs to determine which factors are most important, assigning weights to these categories.
For example, if an office manager position requires four to six years of experience, it would be assigned a preliminary value of 50 points for this factor. However, if experience is among the most important factors, it might be weighted at 1.5, and thus the final value of the experience factor for the office manager job would be 75 (50 points x 1.5 weighting factor = 75). If the office manager job requires an education level of college graduate, but education is less important, it might be weighted at a smaller number, such as 0.75, resulting in a value of 45 for education (60 points x 0.75 weighting factor = 40). The analyst continues until all factors are rated for the office manager job.
In the final step, the job evaluation analyst totals the points for the office manager job and groups it with other jobs with similar job totals. This group will eventually become the job pay grade, ensuring that even dissimilar jobs can be compared equitably.
Although it is complex and may require the participation of management, once completed the point method of job evaluation is easy to use and is not likely to need frequent updating. External point evaluations for common jobs are widely available.