BUILDING INTERNAL EQUITY

MANORANJAN DHAL
 Consequence of Pay Dissatisfaction
Performance

Strikes

Desire for more Grievances

Pay
Search for a Absenteeism
Higher-paying job
Turnover
Lower Absenteeism
Pay Dissatisfaction Attractiveness
Of job
Job dissatisfaction

Psychological Dispensary Poor

withdrawal visits Mental Health
 Phases of Compensation Management
Phase I
Identify and study jobs
Job Analysis
Phase II
Internal Equity Job Evaluation

Job Ranking Job Grading Factor Comparison Point System

Phase III
External Equity Wage and Salary Surveys

Department
Employer Professional Self-conducted
of Labour
Association Association surveys
Phase IV Pricing Jobs

Matching internal Job Evaluation Match rate range for Labour Market
and External worth worth each job worth
 JOB ANALYSIS

PERSON
JOB DESCRIPTION SPECIFICATION

JOB

MANAGING MANAGING MANAGING

INTERNAL EXTERNAL INDIVIDUAL
EQUITY EQUITY EQUITY
 JOB DESCRIPTION
When to prepare JD…

• When New Position is Proposed – to

determine the value of job to the organization
• When recruit for new or open position
• When a person is being promoted
• When performance is being reviewed
• When completing a salary survey
• When required for reorganization, downsizing
or restructuring
 STEPS TO PREPARE JD
1. Get a broad framework of tasks (can use o*net)
2. Customize
3. Identify the appropriate incumbent
4. Ask the incumbent to review the document for
accuracy
5. Rewrite the document based on the
incumbent’s comments & obtain necessary
approval for the document (Use JD Form)
 STEPS TO PREPARE JD
2. Customize

• Methods of data collection

– Observation
– Interview
– Review of Output
– Diaries and logs
– Questionnaire
– Review of film or tapes of actual performance
– Direct participation
 STEPS TO PREPARE JD
3. Identify the appropriate incumbent
• Source of Information
• The Job Holder
• The Supervisor
• A subject matter expert
• A job Analyst
• An instrument or machine
 SEVEN JOB ANALYSIS METHODS
• Critical incident Technique
• Position Analysis Questionnaire (PAQ)
• Job Element Method
• Ability Requirement Scale (Fleishman, 1975)
• Functional Job Analysis
• Task Inventory –CODAP
• Threshold Traits Analysis
 PURPOSE OF JD

• Identify skill level

• Find compensable job factors
– Work environment (e.g. hazards, attention,
physical effort)
– Responsibilities (e.g. supervisory)
– Required level of education (indirectly related to
pay)
– Required level of experience
 Job Evaluation: Concept

• It is a systematic way of determining the

value/worth of a job in relations to other jobs
in an organization
• Job analysis is a systematic way of gathering
information about a job
• Job evaluation begins with job anaysis
 ESTABLISH THE PURPOSE
• SUPORT ORGANIZATIONAL STRATEGY
• SUPPORTS THE WORK FLOW
• IS FAIR TO EMPLOYEES
• MOTIVATES BEHAVIOUR TOWARDS
ORGANIZATION OBJECTIVE
 STEPS FOR JOB EVALUATION
• GATHERING THE DATA
• SELECTING COMPENSABLE FACTORS
• EVALUATING THE JOB
• ASSIGNING PAY TO EACH JOB
 Job Evaluation vs Performance Appraisal

Point Job Evaluation Performance

Appraisal
Define Find the relative worth of Find the worth of
a job a job holder
Aim Determine wage rates for Determine
different jobs incentives and
rewards
Shows How much a job is worth How well an
individual is doing
an assigned work
 Features of Job Evaluation
• The purpose is to produce a defensive ranking of jobs
o which a rational and acceptable pay structure can be
built
• Tries to assess jobs, not people
• The standards of evaluation are relative not absolute
• The basic information on which job evaluations are
made is obtained from job analysis
• Job evaluation is carried out by groups, not by
individuals
• Job evaluation does not fix pay scale, but merely
provides a basis for evaluating a rational wage
structure.
 Process of Job Evaluation
• Gaining Acceptance – top management must explain the aims
and uses of the programme to the employees and union
• Creating job Evaluation Committee – Consists of experienced
employees, union representatives, and HR experts
• Finding the Jobs to be evaluated – Key job of the department
• Analyzing and preparing job description
• Selecting the method of evaluation
• Classifying jobs – arranging jobs in order of importance
• Installing the programme
• Reviewing periodically – change in environment (technology,
product, service etc.)
 Benefits
• Link pay with the requirements of the job
• Offers a systematic procedure for determining
the relative worth of jobs
• Rank the jobs on the basis of rational criteria
such as skill, education, experience,
responsibilities, hazards, etc.
• Employee and union involved in job evaluation
process reduces the wage related grievances
THE MOST TYPICAL COMPENSABLE FACTOR

• SKILLS
• EFFORTS
• KNOWLEDGE
• RESPONSIBILITY
• WORKING CONDITIONS
 JOB EVALUATION PROCEDURE
Non Quantitative Quantitative
Comparison Comparison
involving job as a involving job
whole components
Job Vs job Job Ranking Factor
Comparison Comparison
Job Vs Scale Job Point
Comparison Grading/Classi Method/Hay
fication Plan
 Ranking Method

• Jobs are arranged from highest to lowest in

order of their value or merit to the
organization
• It can be arranged according to the relative
difficulty in performing them
• Ranked in each department and then
combined to develop an organisational
ranking
Microsoft Office
Excel 97-2003 Worksheet
 Ranking Method
• Merits
• Simple to understand and practice
• Fast and inexpensive
• Best suited for small organization
• Demerits
• Crude and entirely subjective
• Rankings are difficult to develop in a large, complex organization
• As ranking is subjective in nature, may offend many employees
• Difficult to defend and legal challenges might make the
approach costly.
 JOB GRADING/CLASSIFICATION
• A certain job is taken as standard and all other jobs are compared with.
• Predetermined number of job groups or job classes are assigned to classifications
• Places groups of jobs into job classes or job grades
Grade Level Grade Description Jobs Included in Grade

GS1 Includes those classes of positions the Typist, Messenger

duties of which are to perform under
immediate supervision, with little or no
latitude for the exercise of independent
judgment.
GS2 Includes those classes of position the Engineering aide
duties of which are Routine work or
comparable subordinate technical work of
limited scope
GS3 Include those classes of positions the Chemist, Account,
duties of which are: difficult and Engineer(civil), Statistical
responsible work, broad working Clerk
knowledge of a special subject matter
 PAY AND CAREER BAND
Pay and Career Band Definition Positions included
Include the all the position which
responsible for the entire business as
whole. The decision impacts the strategy,
growth and future of the organization as a
Executive Band (EB) or Band 1 whole. Chairman, MD, JMD
Include all the positions which are
responsible for functional decision making
and delivery. The impact of the decision
affects the organizational level operation
Senior Professional Band (SPB) or Band 2 and functioning. ED, GM (HR& PR), CEW, CFO
All divisional heads who are in charge of Head - Purchase, Head - HSE, AGM - Costing, Exports and Direct taxes, Head IT,
the implementation of functional AGM- Finance, Head machine Shop, Head- Methods, head - LSF, Head
operations. The decision involved production, Head -marketing and planning, head- Fettling, Head -Projects and
influence the functioning of the Maintenance, Head - Qc, Head - QA, MRQ, Works Inspector, Head Melting, head
Lead Professional Band (LPB) or Band 3 department. - Moulding, Head- Maintenance
Manager -Export, Manager -HR, security officer, Asst Manager - purchase,
Managerial and supervisory role with little Stores - In charge, Engineer - methods, Engineer pattern shop, Engineer -
decision making. Nature of job is mostly production, Engineer- melting, supervisor scrap movement, engineer- -
implementation orientation. Brings in production, Engineer - QA, Engineer - QC, Sr. Supervisor - moulding, Engineer-
potential ideas and solutions which can Maintenance, Engineer - project, Engineer - welding, Engineer NDT, Engineer -
verified by the superiors before Inspection, Engineer - R&D, Engineer - welding, Engineer - Testing and
Professional Band (PB) or Band 4 implementation. documentation, Engineer - heat treatment
job requires professional proficiency and HR- Executive, Welfare Executive, Executive Finance, Executive costing, stores
education. The nature of the role is executive, Executive marketing, Executive - planning, Executive -dispatch,
mostly implementation and supervisory in Supervisor - testing, Supervisor - works I & II, Supervisor Fettling, Supervisor-
certain processes but does not have any Moulding, Supervisor - Electrical, Supervisor-Mechanical, Supervisor - NDT,
Associate Professional Band (APB) or Band 5 decision making authority. Supervisor -inspection, Supervisor - Fettling
Non-managerial, non-supervisory
functions without any decision making
authority. Always works under
Associate Band (AB) or Band 6 supervision. Operators, Support staff, and non-executives
Factors Affecting Job Grading/Classification

• Knowledge Level
• Skill Required
• Creative extent
• Budget control
• No. of reporting people
• Business impact
• Dollar impact
• Client interaction
• Effort Required
• Hazardous
• Working Environment
• Seniority in terms of experience
 Job Grading/Classification Method
• Merits
• Less subjective compared to ranking method
• Takes into account all the factors that a job comprises
• Demerits
• Even when the requirement of different job differ, they may be
combined into single category
• Difficult to write all-inclusive description of a grade
• Oversimplifies sharp differences between different jobs
• When individual job description and grade descriptions do not
match, the evaluators have the tendency to classify the job
using their subjective judgments.
 FACOTR COMPARISON METHOD
• Internal jobs are compared with each other
across several factors such as skills, mental
effort, responsibility, physical effort, and
working conditions.
• For each job the compensable factors are
ranked according to their relative importance in
each job
• The decision makes assign monetary value to
each factor
 FACOTR COMPARISON METHOD
• Merits
• Less subjective compared to ranking and
classification method
• Takes into account all the factors that a job
comprises
• Demerits
• Complex in terms of translating a factor
comparison to actual pay
• Used less frequently because of the complexity
involved.
 Point Method

• Identify the compensable factors

• Construct a scale reflecting degrees within each
factor. Define the compensable factors and
associated degrees.
• Assign points to the degrees. Rank the factors
and award the highest point to it.
• Use the job analysis data to assign point for a job
 STEPS IN POINT PLAN
1. Identify the compensable factor
2. Define the factors and weight them according to the
perceived importance to the organization
3. Analyze each factor – how many levels of job can be
covered (degrees of the factors)
4. Use relative weightage to prepare a scale
5. Evaluators study the JD and assign points
6. Each job requires a total job content point value
7. Title of the position is arranged according to their total
point values
8. Grouping of the total points
 FACTOR EVALUATION SYSTEM FACTORS
FACTORS NO. COMPENSABLE FACTORS
Factor 1 Knowledge required by the position
Factor 2 Supervisory Controls
Factor 3 Guidelines for the work
Factor 4 Complexity
Factor 5 Scope and effects of the work
Factor 6 Personal contacts
Factor 7 Purpose of contacts
Factor 8 Physical demands
Factor 9 Work environment
 DETERMINE COMPENSABLE FACTOR

• Based on the strategy and Values of the

Organization
– Innovation,
– Quality
– Service
• Based on the work itself
– Supervisory control
• Acceptable Stakeholder
– Hospitals
– Child care
 Defining a Compensable factors and Associated Degrees
KNOWLEDGE
This factor measures the knowledge or equivalent training required to perform the job duties.

1st Degree
Use of reading and writing, adding and subtracting of whole numbers. Following of instructions: use of
fixed gauges, direct reading of instruments and similar devices where interpretation is not required
2nd Degree
Use of subtraction, addition, multiplication, and division of numbers including decimals and fractions,
simple use of formulas, charts, schedules: use of adjustable measuring instruments, checking reports and
forms, records and comparable data where interpretations is required

3rd Degree
Use of mathematics with the use of complicated drawings and specifications: various types of precision
measuring instruments. Equivalent to one to three years applied trades training in a particular or
specialized occupation

4th Degree
Use of advanced trade mathematics equivalent to complete accredited apprenticeship in a recognized
trade or occupation or equivalent to two year technical college education
5th Degree
Use of higher mathematics involved in the application of engineering principles together with
comprehensive knowledge of theories and practices of various engineering fields equivalent to complete
four years of technical education or university education.
 COMPENSABLE FACTOR DEFINITION – DECISION
MAKING
Risk and complexity of decision Impact of the decision Effectiveness of
decision can be
measured
Few decisions. Work performed Error would cause minor delay One day
according to SOP and cost increments
Guidelines are available from Inappropriate decisions, One month
defined procedure. Incumbent recommendations or errors
must exercise some judgement in would cause considerable delay
selecting appropriate procedure and relocation of fund. Affect
scheduling, project completion
in other work units
Some guidelines are available. Errors would affect attainment One year
Decisions require high level of of objectives for the company
judgement and long term growth
Few guidelines are available. More than a year
Decisions requires innovation and
creativity
 Job evaluation in a point method
Job Requirement Points
Responsible only for use of own time 15
30
Must coordinate with crew in a production unit 45

60
Assure flow of individual processing and meets production 75
schedule for machined parts

90
Develops schedule and assumes joint and supervisory 105
responsibility for work unit
120
 NATIONAL ELECTRICAL MANUFACTURING
ASSOCIATION (NEMA) POINT PLAN
  DEGREES
  FACTORS 1st 2nd 3rd 4th 5th
SKILL            
Education 14 28 42 56 70
Experience 22 44 66 88 110
  Knowledge 14 28 42 56 70
EFFORTS            
Physical Demand 10 20 30 40 50
  Mental Demand 5 10 15 20 25
RESONSIBILITY            

Equipement/Process 5 10 15 20 25
Material/Product 5 10 15 20 25
Safety of Others 5 10 15 20 25
  Work of Others 5 10 15 20 25

JOB CONDITIONS            
Working Condition 10 20 30 40 50
  Hazards 5 10 15 20 25
 WEIGHT THE FACTORS ACCORDING
TO IMPORTANCE
Compensable Factor Degree × Weight ˭ Total
1 2 3 4 5
Mental * 20% 80
Skill (40%) Experience * 20% 60

Physical * 15% 30
Effort (30%) mental * 15% 60
Effect of Error * 10% 40
Responsibility (20%) Innovation * 10% 30
Environement * 5% 5
Working Condition (10%) Hazards * 5% 5
 HAY PLAN
Know How Problem Solving Accountability
Total of all knowledge and The amount of original Being answerable for actions
skills required to do a job thinking required by the job taken on the job
for arriving at decisions
It has three dimensions It has two dimensions It has three dimensions
•Technical Knowledge •Degrees of freedom •Freedom to act
•Management Responsibility •Types of mental activity •Dollar magnitude
•Responsibility for motivating •Impact
others

Using the chart a number can It is expressed as a percentage Accountability is given a point
be assigned to the level of of know how, as people think value independent of the
know how needed in a job. with what they know. The other two factors.
This number or point value percentage judged to be
indicates the relative correct for a job is applied to
importance of know how in the know how point value, the
the job being evaluated result is the point value given
to problem solving
 PAY STRUCTURE IN INTERNAL EQUITY

• Design Pay Range and Pay Grade

• Setting minimum, midpoints, and maximum
• Determining overlap between ranges