LO4

• Pricing Jobs


  • Job evaluation ​
  • Market-pricing​
  • Skill-based
• Job Evaluation

  systematic procedures to determine the relative worth or value of jobs.
• Job Evaluation

  identify which jobs should be paid more than

  others, which can be done by job ranking, job grading, or points systems.
• Job Ranking

  simplest method of job evaluation
• Job ranking


  Specialists review the job analysis information for each job. Each job is then ranked subjectively according to its importance in comparison with other jobs.
• Ranking 


  tends to be best suited for smaller organizations with simple organizational hierarchies
• Job Grading


  or job classification
• Job grading


  works by assigning each job a grade
• Public Service Commission of Canada

  largest user of the job grading approach
• Point System


  evaluates the critical—also called compensable—factors of each job.
• Point system


  Points are allocated to each compensable factor based on the skill, responsibility, effort, and working

  conditions required, and the total points are summed.
• Market-Based Pay Structures


  focuses on external competitiveness—how much organizations should pay for jobs based on what

  their competitors are offering for similar work.
• Wage and salary surveys


  Most firms rely on this to determine fair rate of compensation.
• Wage and salary surveys


  discover what other employers in the same labour market are paying for specific key jobs.
• labour market


  area from which the employer recruits—is generally the local community; however, firms may have to

  compete for some workers in a wider market.
• Sources of Compensation Data


  • Employment and Social Development Canada
  • Employee trade and professional associations
  • Consulting companies
• The major challenge of market pricing is matching jobs within the organization to those reported in the survey.
• HR group can determine the percentiles they are going to pay:

  • Matching the market
  • Market leader
  • Market lag
• Matching the market


  Targeting the fiftieth percentile means the organization will pay at the middle of all organizations with similar positions.

  Fifty percent of competitors would pay more for the same job, and 50 percent would pay less.
• Market leader


  typically aim for paying at the seventy-fifth percentile, meaning 75 percent of competitors

  will pay less for the same job.

  When competing for employees with specialized skill sets in a tight labour market, as Google was in the earlier example, a market leader position makes sense.
• Market lag


  Paying at the twenty-fifth percentile, where only 25 percent of firms pay less for comparable jobs, is a market lag position.

  This strategy may suit loose labour markets as in the earlier warehouse example. Organizations with strong non-monetary forms of compensation (e.g., status, growth opportunities) may also opt for a market lag position.
• the use of market pricing has gone up with 9 out of 10 organizations using it to some degree and 50 percent relying on it exclusively. The point-factor approach to job evaluation is now only used by 20 percent of firms.