BASIC CONCEPTS

• For good industrial relations, each employee should

i. Receive sufficient wages or salaries to sustain himself and his dependents
ii. Feel satisfied with the relationship between his wages and the wages of other people
performing the same type of work in some other organization

• Primary objective of wage and salary administration program is that each employee
should be equitably compensated for the services rendered by him to the enterprise
on the basis of:
i. Nature of job
ii. Present worth of that type of job
iii. Effectiveness with which individual performs the job
 DETERMINATION OF WAGES

MINIMUM
JOB ANALYSIS
WAGE LAWS

JOB ADMINISTRATI
DESCRIPTION & JOB WAGE WAGE ON OF WAGE
SPECIFICATION EVALUATION SURVEYS STRUCTURE STRUCTURE

PERFORMANC PERFORMANCE
E STANDARDS APPRAISAL

WAGE
PAYMENTS
 CONCEPT OF JOB EVALUATION
• In simple worlds, job evaluation is the rating of jobs in an organization. This is
the process establishing the value or worth of jobs in a job hierarchy and
compares the relative intrinsic value or worth of jobs within an organization.

• Formal system of determining the base compensation of jobs.

• According to the International Labour Organization (ILO), “job evaluation is

an attempt to determine and compare the demands which the normal
performance of a particular job makes on normal workers, without taking into
account the individual abilities or performance of the workers concerned”.
 CONCEPT OF JOB EVALUATION
• The British Institute of Management defines “job evaluation as the process of
analysis and assessment of jobs to ascertain reliably their relative worth using
the assessment as the basis for a balanced wages structure”.

• Edwin B.Flippo defines job evaluation as “a systematic and orderly process of

determining the worth of a job in relation to other jobs”.
 OBJECTIVES OF JOB EVALUATION
• equitable wage for a job and reasonable wage differentials between different jobs
in a hierarchical organization
• Consistent wage policy
• Eliminate wage inequalities
• Rational basis for incentive and bonus schemes
• Framework for periodic review and revision of wage rates
• Reduce grievances and labour turnover
• Basis for wage negotiations with employee union
• Guage and control payroll costs
PROCESS OF JOB EVALUATION

CONSTITUTING SELECTING SLECTING

GAINING JOB DESCRIBING WEIGHING THE ASSIGNING Periodic
JOBS TO BE METHOD OF
ACCEPTANCE EVALUATION EVALUATED
THE JOBS
EVALUATION
JOB FACTORS MONEY VALUES Review
COMMITTEE
PRINCIPLES OF JOB EVALUATION

• Consideration of Job

• Clarity of Job Information

• Pooling of knowledge

• Grouping of Jobs
• ADVANTAGES • LIMITATIONS
METHODS OF JOB EVALUATION

JOB
EVALUATION

NON- QUANTITATIVE
QUANTITAIVE OR ANALYTICAL
METHODS METHODS

RANKING OR GRADING OR
FACTOR
JOB JOB POINT RATING
COMPARISON
COMPARISON CLASSIFICATION
 RANKING METHOD

• Simplest method

• List the jobs in order from highest to lowest worth to the company

• Jobs are not split up into component parts

• Comparison is made on the basis of whole jobs

 RANKING METHOD - TECHNIQUES

1. Utilizing Job descriptions

• Evaluating and analyzing Job descriptions

• Differences in jobs are noted with respect to duties, skills, responsibilities etc.

• Each job is ranked as per its relative significance

• Each rater ranks the job independently

• Final rank is calculated on the basis of majority vote or average

 RANKING METHOD - TECHNIQUES

1. Utilizing Job descriptions

JOB RATER-1 RATER-2 RATER-3 RATER-4 AVERAGE

SPECIALIST 5 3 4 3 3.75

MANAGER, PAYROLL 4 5 2 5 4

ADMINISTRATOR 2 1 3 1 1.75

CLERK 6 6 5 6 5.75

MANAGER, FINANCE 3 4 2 4 3.25

DIRECTOR 1 2 1 2 1.5
 RANKING METHOD - TECHNIQUES

1. Utilizing Job descriptions

• Rater is required to keep in mind all the jobs being ranked.

• Not possible when the number of jobs are large.

• Rater may overlook significant differences

• Largely subjective
 RANKING METHOD - TECHNIQUES

2. Paired comparisons
• Each job is paired with every other job in the series.

• More difficult job in each pair is identified.

• Rank is assigned on the basis of number of times a job is rated more difficult.

For example: Job A is difficult than Job B= Assign 2 points to Job A

Job B is less difficult than Job A= Assign 0 point to Job B

Job A is equivalent to Job B= Assign 1 point to both the Jobs

 RANKING METHOD - TECHNIQUES

2. Paired comparisons
REFERENCE DIRECTOR, MANAGER, MANAGER, SECRETARY, TOTAL POINTS
FINANCE FINANCE AUDIT FINANCE

DIRECTOR, - 2 2 2 6
FINANCE

MANAGER, 0 - 1 2 3
FINANCE

MANAGER, 0 1 - 2 3
AUDIT

SECRETARY, 0 0 0 - 0
FINANCE
 RANKING METHOD - TECHNIQUES

3. Ranking along a number line

• Extension of job descriptions and paired comparison method.

• Ranks obtained from them are spread along a number line

• Highest ranked job is placed at one end and other jobs are spaced as per their closeness to
highest ranked job.

DIRECTOR, FINANCE

20 40 60 80 100
 JOB GRADING OR CLASSIFICATION METHOD

1. Establishment of job classes or grades

• Group of jobs that are similar in terms of their tasks, duties, responsibilities.

2. Definition of each grade –broad descriptions

3. Classification of individual jobs according to how well their characteristics

match those of the different grade definitions.

Most prevalent in government jobs or public sector undertakings

 JOB GRADING OR CLASSIFICATION METHOD

Example: Grades or class for administrative workers

GRADES DESCRIPTION

Engage in special projects without supervision, provide personal administrative

A-1 assistance to management level personnel and may have supervisory responsibilities
over A-2 and A-3 personnel.
Clerical work with no supervision and may be assigned simple special projects. The job
typically requires an associate level or vocational degree and requires the same
A-2
knowledge as an A-3 as well as intermediate knowledge of word processing and
spreadsheets
Clerical work under close supervision. The job typically requires a high school diploma
A-3 and a general knowledge of office procedures, equipment, etiquette and the ability
to follow instructions. There are no supervisory responsibilities.
 POINT METHOD
• Most widely used method of job evaluation

• It is a method in which number of compensable factors are identified and then the
degree to which each of these factors is present on the job is determined.

• Assign different number of points to each degree of each compensable factor

• Determine the degree to which each compensable factor is present in a job

• Total point value for the job can be calculated by adding up the corresponding
degree points for each factor.
 POINT METHOD- STEPS

1. Choose Benchmark Jobs- representative jobs from each job category

2. Select Compensable Factors-

• Skill (Education, experience, training, judgement)

• Effort (Physical and mental)

• Responsibility (Quality of output, raw materials, machinery and equipment, safety of others)

• Working Conditions (accidents, hazards, discomfort etc.)

• Other factors can also be added keeping in mind strategic and practical considerations
 POINT METHOD- STEPS

3. Define the factors – clear and written description regarding factors and sub-factors

4. Determine the degrees-

• same no. of degree should be used to maintain consistency,

• usually four to six

• Depends upon judgement

POINT METHOD- STEPS

DEGREE DEGREE DEFINITION- ‘SKILL’

1 Simple knowledge on routine task. Required no training

2 Basic knowledge. Required moderate degree of experience

3 Standard knowledge. Required training

4 Technical or special knowledge. Required judgement and follow

standard or specialized procedures

5 Extensive knowledge. Independent judgement required

 POINT METHOD- STEPS

5. Assign weights to factors –

• determine relative importance (or weighting) of each factor depending upon their significance to
job.

• Assume we have 100 percentage points to allocate for each job, then assign % weights of say for
example 45% for skills, 25% for the effort, 20% responsibility and 10% working conditions.

6. Convert percentages to Points for each factor

• Assume total of 1000 points are there , multiply the % weight for each compensable factor by 1000
like 1000*45%= 450 points for skill, 1000*25%= 250 points, 1000*20%= 200 points and 1000*10= 100
points
 POINT METHOD- STEPS

7. Assign point value to Degrees- assign point values to each degree of each
compensable factor

For example we have 5 possible degrees of skill and skill factor have 450 points
maximum. Point values may be decided on the basis of arithmetic progression.
 POINT METHOD- STEPS

Assignment of Point Values to Degrees

DEGREES 1 2 3 4 5
FACTORS
SKILLS 90 180 270 360 450

EFFORT 50 100 150 200 250

RESPONSIBILITY 40 80 120 160 200

WORKING CONDITIONS 20 40 60 80 100

 POINT METHOD- STEPS

8. Evaluation of Jobs-
• Review of each job description and job specification

• Determine the degree to which each compensable factor is present in each job

Example: Job of Master Mechanic

• This job requires fourth degree level of skill point, the second degree level of effort, third degree
level of responsibility and first degree level of working conditions.

• Finally, we add up these degree points for each job to determine each job’s total number of
points.

• Thus, master mechanic job gets 360+100+120+20= 600 points

 POINT METHOD- STEPS

8. Assign money values-

• A standard unit of money be assigned to each point so as to convert point scores into monetary
values.
Point Range Daily Wage Rates
200-300 ₹ 150-250
301-400 ₹ 250-350
401-500 ₹ 350-450
501-600 ₹ 450-750
And so on
 FACTOR COMPARISON METHOD
• It involves ranking of benchmark jobs in relation to each other on each of several
factors.
• Select and define the factors
• Select key Jobs
• Rank key jobs by factors
• Decide rates for key job
• Apportion the wage rate
• Evaluate the remaining jobs
 FACTOR COMPARISON METHOD

KEY JOB WAGE RATE SKILL PHYSICAL MENTAL RESPONSIBILITY WORKING

(DAILY) EFFORT REQUIREMENTS CONDITIONS

TOOL MAKER 80 25(1) 5(5) 23(1) 24(1) 3(5)

WELDER 75 20(3) 15(2) 14(3) 11(4) 15(2)

MACHINIST 70 22(2) 7(4) 17(2) 20(2) 4(4)

PAINTER 65 13(4) 12(3) 10(4) 12(3) 18(1)

LABOURER 50 10(5) 19(1) 5(5) 4(5) 12(3)