LESSON 20

Compensation Structure and Differentials

Job Evaluation and Internal Equity

Chapter 7: Introduction To Implementation of Evaluated Job Structure

• To understand the Essentials of Success of Job Evaluation Programmes

• To know the Advantages of Job Evaluation

• To learn the Limitations of Job Evaluation

• To understand the Implementation of the Evaluated Job Structure

• To know the Suggestions for improving of the Job Evaluation Programs

Essentials of success of Job Evaluation Programs

When it is finally decided to install a formal system of job evaluation irrespective which
system is decided upon, the utmost care must be exercised to ensure that Human as well
as technical aspects are taken into account.

In order that a job evaluation system works efficiently, it is necessary that all those to are
concerned with job evaluation should be fully conversant with the techniques d
implications of the different available systems. Otherwise, the chances of success are
doubtful.

The following measures may be adopted:

(i) Supervisors should have full knowledge of the system. They should understand it, and
be able to explain to their workers the purpose of the plan and how it works.

They must accept the desirability of the plan, for if they are not convinced that it is
useful, they will certainly not be able to convince the employees.

(ii) Supervisors as a group should receive a thorough training in advance of the actual
introduction of the plan to enable them to explain the policies, principles and procedures
to anyone who wants to understand them.

(iii) The management must give the widest publicity to every phase of the programme,
utilizing employee publications, notice boards, departmental meetings and letters to
employees' homes.
(iv) Separate pay structures should be maintained for major groups of employees. For
example, it would be difficult to work out a plan equally applicable to factory workers,
office workers, salesmen, and departmental heads.

The wages that are offered must be at or about the prevailing rate in order that there may
be a successful competition for capable people.

(v) Whatever plan or system is selected for each group will arouse some fears or
apprehensions. To overcome these, the details of the administration of the plan should be
as simple as possible, and the management should endeavor to involve a broad range of
employees from a number of departments.

According to the findings of the International Relations Sections of the Princeton

University, the following conditions are necessary for the successful operation of a job
valuation programme:

(a) It must be carefully established by ensuring that:

(i) The management's aims are clear to all concerned and that not only the
manual workers but also all levels of supervision and management employees
fully understand its implications; and

(ii) All the relevant internal and external factors have been taken into account in
arriving at the final form of the scheme.

(b) It must have the full approval and continued support and backing of the top
management.

(c ) It must have obtained the acceptance of trade unions.

(d) Adequate administrative control must be set up to ensure:

(i) a centralized coordination of the scheme;

(ii) the evaluation of new and changed jobs;

(iii) a proper control of individual rate ranges; and

(iv) the conduct of wage surveys to provide the necessary information about the
intra-plant ranges.

(e) The importance of factors, other than job content, in wage rate determination
(employment market conditions, sex, wage differentials, geographical wage
differentials, and the relative bargaining power of the management and the trade
 union) must be recognized and taken into consideration while launching a job
evaluation programme.

(f) Before launching a job evaluation programme, certain issues should be decided
beforehand. There are:

(i) which category of employees are to be covered (i.e., whether hourly paid job
or salaried job employees) and up to what range?

(ii) who will evaluate a job outside consultants or trade analysts or the personnel
of the personnel department?

(iii) How will the employees be consulted in regard to the method of putting the
programme through? and

(iv) does a proper atmosphere exist for launching of the programme?

Advantages of Job Evaluation

Knowles and Thomson state that job evaluation is useful in eliminating many of the evils
to which nearly all systems of wage and salary payments are subject. These are:

(i) Payment of high wages and salaries of persons who hold jobs and positions not
requiring
great skill, effort and responsibilities;

(ii) Paying beginners less than they are entitled to receive in terms of what is required of
them;

(iii) Giving a raise to persons whose performance does not justify the raise;

(iv) Deciding rates of pay on the basis of seniority rather than ability;

(v) Payment of widely varied wages and salary for the same or closely related jobs and
positions; and

(vi) Payment of unequal wages and salaries on the basis of race, sex, religion or political
differences.
It may, however, be noted that a job evaluation system does not accomplish all the
purpose; rather it facilitates them. Basically, it provides a systematic catalogue of the jobs
in an organisation, which is indispensable for management purposes.

I.L.O., Publication claims following advantages for job evaluation:

(i) Job evaluation is a logical and, to some extent, an objective method of ranking jobs
relative to one another. It may help in. removing inequalities in existing wage structures
and in maintaining sound and consistent wage differentials in a plant or industry.

(ii) In the case of new jobs. the method often facilitates fitting them into the existing
wage structure.

(iii) The method helps in removing grievances arising out of relative wages; and it
improves labour-management relations and workers' morale. In providing a yardstick, by
which workers' complaints or claims can be judged, the method simplifies discussion of
wages to be explained and justified.

(iv) The method replaces the many accidental factors, occurring in less systematic
procedures, of wage bargaining by more impersonal and objective standards, thus
establishing a clear basis for negotiations.

(v) The method may lead to greater uniformity in wage rates, thus simplifying wage
administration.

(vi) The information collected in the process of job description and analysis may also be
used for the improvement of selection, transfer and promotion procedures on the basis of
comparative job requirements.

(vii) Such information also reveals that workers are engaged in jobs requiring less skill
and other qualities than they possess, thereby pointing to the possibility of making more
efficient use of the plant's labour.

Limitations of Job Evaluation

These are:

(i) Though many ways of applying the job evaluation techniques are available, rapid
changes in technology and in the supply and demand of particular skills have given rise
to problems of adjustment. These need to be probed.

(ii) Substantial differences exist between job factors and the factors emphasised in the
market. These differences are wider in cases in which the average pay offered by a
company is lower than that prevalent in other companies in the same industry or in the
same geographical area.

(iii) A job evaluation frequently favours groups different from those, which are favoured
by the market. This is evident from the observations of Kerr and Fisher. They observe,
"the jobs which tend to rate high as compared with the market are those of janitor, nurse
and typist, while craft rates are relatively low. Weaker groups are better served by an
evaluation plan than by the market; the former places the emphasis not on force but on
equity.
(iv) Job factors fluctuate because of changes in production technology, information
system, and division of labour and such other factors. Therefore, the evaluation of a job
today is made on the basis of job factors, and does not reflect the time job value in future.
In other words, continuing attention and frequent evaluation of a job are essential.

(v) Higher rates of pay for some jobs at the earlier stages than other jobs or the evaluation
of a higher job higher in the organizational hierarchy at a lower rate than another job
relatively lower in the organizational hierarchy often give rise to human relations
problems and lead to grievances among those holding these jobs.

(vi) When job evaluation is applied for the first time in any organization, it creates doubts
and often fear in the minds of those whose jobs are being evaluated. It may also disrupt
the existing social and psychological relationships.

(vii) A large number of jobs are called red circle jobs. Some of these may be getting more
and others less than the rate determined by job evaluation.

(viii) Job evaluation takes a long time to install, requires specialized technical personnel,
and may be costly.

(ix) When job evaluation results in substantial changes in the existing wage structure, the
possibility of implementing these changes in a relatively short period may be restricted
by the financial limits within which the firm has to operate.

Implementation of the Evaluated job structure

The evaluated job structure has to be translated into a structure of wage rates. This
depends upon:

(i) The range of wages to be paid, i.e., what should be the maximum and minimum wages
for the grade.

(ii) Should there be any overlapping between pay ranges for adjacent pay grades? If so,
by how much?

(iii) How many grades should be used?

(iv) On what basis will an individual employee be advanced in wages through the
established pay range for the grade?

These issues are inter-related, and a change in any of these calls for a change in at least
one or the other issue.

As far as the first issue is concerned, it may be noted that the difference between the
maximum and the minimum is referred to as the 'wage range' or 'wage differential.
While evaluating a wage structure, it should be seen that the range is not too high and that
the job evaluated wage curve does not have too many deviations from the existing
industry wage line. This should be done to prevent the turnover of workers and avoid
dissatisfaction amongst them.

A wage range can be made with or without an overlap. Theoretically, there should be no
overlap because, in that case, an employee near the top of a lower grade gets higher
wages than the employee in the higher grade. Too great an overlap may cause
dissatisfaction amongst employees and minimize the rewards for superior performance.

However, though a too great overlap should be avoided, there should be some
overlapping between the grades so that employees in the lower grades may, following an
excellent performance, get higher wages than an employee working in a higher grade but
showing a poor performance.

As regards the number of grades to be adopted in many wage structures, the accuracy
may be secured up to six grades; 12 or more grades result in a higher accuracy.
Generally, the number of grades considered are between 6 to 11. If more grades are
adopted, the overlapping between them would be greater

Suggestions for improving working of job evaluation programs

We suggest the following measures and steps for improving the working of evaluation
programmes:

(1) A job evaluation scheme should be chosen cautiously. It should be devised and
administered with due regard to the conditions of the employment market, which cannot
be ignored if the scheme is to be successful. It should, therefore, reflect those forces
which are important in the market, e.g., relative supply of and demand for labour,
bargaining power of the parties and job conditions.

(2) The details of a scheme should be drawn up in such a way that they do not conflict
with other provisions of a Collective Agreement such as, for example, seniority clauses
and grievance procedure.

(3) The scheme should be introduced on a plant-to-plant basis than applied to a whole
industry. This is because it is difficult to standardize jobs throughout an industry unless
the plants in it are so familiar that they can be treated as being virtually a single firm.

(4) The scheme should be sold to all concerned and suggestions sought. If the workers in
a plant are unionized, it is highly desirable that any scheme adopted should be agreed to
and, if possible; developed jointly by the company and the trade unions.

(5) It is of major importance that-the number of job titles and classifications be kept to a
minimum. If they are not, a scheme becomes too inflexible because of the narrow
coverage of the job descriptions. Promotions within a grade become more serious.
Moreover, workers tend to feel more insecure and cling to their present jobs because they
may not have the qualifications for another job.

(6) Any anticipated changes in methods should be carried out before a scheme is installed
and all modifications in it should be resisted until it becomes fully established.

(7) In preparing job descriptions it is a sound practice to emphasize in them the things
which make one job different from another rather than to find a comprehensive statement
of all the duties of the jobs.

(8) A scheme which provides for single rates and for definite ratios between the rates for
classes of workers (A, B,C etc.) within a job grade is easier to administer than one which
establishes rate ranges and has no fixed ratios.

(9) A scheme is better administered by the Industrial Relations staff of a company than
by the Industrial Engineers who may have developed it. The essence of successful
administration of a scheme is flexibility, and this is better .understood by those engaged
in industrial relations work than by Industrial Engineers.

(10) The better the state of industrial relations the easier it is to intr0duce a job evaluation
scheme.

Tutorial Activity 1.1

Write-intro

Factors used in Rating jobs

The factors usually considered in any rating procedure are education, training,
experience, mental effort, physical effort, visual attention, initiative, responsibility,
working conditions, and physical hazards. These factors are sub-divided into degrees -
usually six; and points are allocated to these.

1. Education

This factor appraises the educational background of an individual to determine whether

he do the job satisfactorily.

First Degree: Ability to read, write and follow simple written or oral instructions.

Second Degree: Basic school education or its equivalent to do small arithmetical

calculations involving addition, subtraction, division and multiplication of decimals and
fractions.
Third Degree: High school education to determine knowledge of elementary accounting
or general shop practice and manufacturing methods.

Fourth Degree: Intermediate education to determine the ability to understand and

perform work calling for a knowledge of general engineering principles, commercial
theory, principles of advanced drafting, knowledge of general accounting fundamentals
and of complicated shop procedures and processes, etc.

Fifth Degree: Graduation to determine the ability to understand and perform work of a
specialized or technical nature, knowledge of finance, business administration, chemistry,
physics, journalism or any other technical or specialized field.

Sixth Degree: Post-graduate research experience in any technical or specialized field.

2. Training

This factor appraises the period of training needed by an average individual to perform
his efficiently.

First Degree: Upto 6 months;

Second Degree: 6 to 12 months;

Third Degree: 12 to 15 months;

Fourth Degree: 15 to 18 months;

Fifth Degree: 18 to 21 months;

Sixth Degree: Over 21 months.

(3) Experience

This factor appraises the length of period needed by an average employee with a
previously specified educational standard to be able to perform the job satisfactorily.

First Degree: Upto 3 months;

Second Degree: 3 to 6 months;

Third Degree: 6 months to 2 years;

Fourth Degree: 2 to 4 years;

Fifth Degree: 4 to 6 years;

Sixth Degree: Over 6 years.

4. Mental efforts

This factor appraises the mental effort required of an individual to perform his job
satisfactorily.

First Degree: Minimum mental effort required to do a simple rating job.

Second Degree: Some mental effort required.

Third Degree: Considerable mental effort needed.

Fourth Degree: Considerable organizing ability required.

Fifth Degree: Sustained and diversified mental effort required.

Sixth Degree: Sustained and diversified mental effort required, as also clarity "Of
concepts and ideas.

5. Physical Efforts

This factor appraises the physical effort needed from an employee for a satisfactory
performance of a job.

First Degree: Very light physical effort required.

Second Degree: Light physical effort required, as in an office job.

Third Degree: Continuous physical activity required.

Fourth Degree: Moderately heavy physical activity required.

Fifth Degree: Great physical effort to lift or push heavy objects.

Sixth Degree: Extremely arduous physical effort required.

6. Visual Attention

This factor appraises the extent and continuity of the visual attention needed on a job.

First Degree: Minimum visual attention required.

Second Degree: Ordinary visual attention required.

Third Degree: Fairly close attention required.

Fourth Degree: Close visual attention required to check the quality of products.

Sixth Degree: Extremely close work with intense and constant visual attention.

7. Initiative

This factor appraises the capacity for independent decision or action required of an
individual.

First Degree: Elementary type of job. The employee receives detailed instructions and is
expected to perform the job exactly, as indicated, without deviations.

Second Degree: Repetitive type. of job. Requires a close following of instructions and
procedures.

Third Degree: Requires more frequent simple decisions on the part of the employee, but
only when definite clear-cut precedents are available.

Fourth Degree: In addition to frequent simple decisions, the job calls for occasional
decisions or actions following only general procedures in the absence of clear-cut
procedures.

Fifth Degree: Difficult and complex type of job. Requires independent and original action
to achieve the desired results.

Sixth Degree: Extremely difficult and complex type of job requiring independent and
original action to achieve the desired results.

8. Responsibility

This factor appraises the responsibility, which goes with the job for preventing damage to
tools, equipment or materials used in the performance of a job.

First Degree: Probable damage to tools up to Rs. 100 for an average mishap.

Second Degree: Probable damage to tools between Rs. 100 and Rs. 200.

Third Degree: Probable damage to tools between Rs. 200 to Rs. 500.

Fourth Degree: Probable damage to tools up to Rs. 5,000 per mishap.

Fifth Degree: Probable damage to tools, equipment and materials not to exceed Rs.
10,000 per mishap.

Sixth Degree: Probable damage exceeding Rs. 10,000 per mishap.

9.Working Conditions

This factor appraises the physical environment under which a job is performed. Physical
envorment includes heat, cold, dampness, darkness, glare, dust, fumes, noise, etc.

First Degree: Excellent working conditions.

Second Degree: Occasional exposure to dust or fumes.

Third Degree: Constant exposure to one or more unpleasant conditions.

Fourth Degree: More disagreeable conditions.

Fifth Degree: Continuous exposure to disagreeable conditions.

Sixth Degree: Continuous exposure to various intensely disagreeable conditions.

(10) Physical Hazards

This factor appraises the accident or health hazards, which exist even though safety
devices have been installed.

First Degree: No hazard exists.

Second Degree: Minor injuries may be sustained if an accident takes place.

Third Degree: If an accident takes place, an employee would receive severe cuts or burns.
Fourth

Fourth Degree: The job is quite risky and the employee may catch some industrial
disease. Fifth

Fifth Degree: There may be loss of some part of the body in the accident.

Sixth Degree: If an accident takes place, the employee is more likely to be killed or
permanently ed by injuries.

Tutorial Activity 1.2

Intro-write

Pay Surveys and Job evaluation

External relativities are established by pay surveys and research which analyze and
compare market rates in order to achieve external competitiveness.
Internal relativities are assessed by job evaluation which considers the relative value- or
size of jobs and sometimes generic roles within an organization as a oasis for achieving
internal equity. There may be tension when the often competing claims of external
competitiveness and internal equity pave to be reconciled, particularly in pay markets
under pressure through skills shortages.

Pay structures

Pay surveys and job evaluation provide the data for the design and management of pay
structures. They provide frameworks within which levels of pay for jobs and the
differentials are described or defined in the form of grades, bands, scales or spot rates
(individual job rates).

Pay structures also define the limits within which the pay of employees can progress
within their grades or bands and how this progression takes place.

This can vary in accordance with assessments of performance, competence or skill.

Progression may be up a fixed incremental scale or spine which defines the pre-
determined pay increases that employees can receive year by year on the basis of their
time in the job.

But this approach is becoming much more rare. Progression in a pay structure can also be
along a pay or maturity curve which relates increases in pay to competence growth and/or
higher levels of performance.

Pay structures may cover all or only part of the organization. There may, for example, be
one structure for staff on salaries and another one for manual workers on wages (although
this often invidious distinction is progressively disappearing).

Different structures may exist for separate job families (groups of jobs where the work is
similar), or market groups jobs in which rates of pay are influenced by market pressures
so that to attract and retain people they have to be paid more than those in otherwise
comparable jobs). Structures may consist of an extended hierarchy of relatively narrow
and / grades or a fairly small number of broad band (broadbanding).

Pay structures are designed by reference to data from job evaluation, competence analysis
and analysis of market practice by external benchmarking (pay surveys). The design
process is not a scientific one Much judgment has to be exercised.