Compensable Factors – HR

A HR manager can use two basic approaches to compare several jobs. First, he can take an intuitive approach. He might decide that one job is more important than another and not dig any deeper into the logic. As an alternative, he can also compare the jobs by focusing on certain basic factors the jobs have in common. Compensation management specialists call these compensable factors. They are the factors that established how the jobs compare to one another and that determine the pay for each job.

Some employers develop their own compensable factors. However, most use factors popularized by packaged job evaluation systems or by federal legislation. For example, the Equal Pay Act focuses on four compensable factors skills, effort responsibility, and working conditions. The method popularized by the Hay consulting firm focuses on three factors: know how, problem solving ad accountability. In 2004, WalMart instituted new wage structure based on knowledge, problem soling skills accountability requirements.

Identifying compensable factors plays a central role evaluation. A job is usually compared with all comparable jobs using the same compensable factors. However, the compensable factors used depend on the job and the job evaluation method. For example, the HR manager might choose to include ‘decision making’ for a manager’s job, though it might be inappropriate for cleaner’s job.

Preparing for the Job Evaluation:

Job evaluation is mostly a judgmental process one demanding close cooperation among supervisors, HR specialists, and employees and union representatives. The main steps include identifying the need for the program, getting cooperation, and then choosing an evaluation committee. The committee then performs the actual evaluation.

Identifying the need for job evaluation should not be difficult. For example, dissatisfaction reflected in high turnover, work stoppages, or arguments may result from paying employees different rates fro similar rates for similar jobs. Managers may express uneasiness with an informal way of assigning pay rates to jobs, accurately sensing that a more systematic assignment would be more equitable.

Next, since employees may fear that a systematic evaluation of their jobs may actually reduce their pay rates, getting employees to cooperate in the evaluation is a second important step. The concerned can tell employees that as a result of the impending job evaluation program, pay rate decisions will no longer be made just by management whim; that job evaluation will provide a mechanism for considering the complaints they have been expressing; and that no present employee’s rate will be adversely affected as a result of the job evaluation.

Next, choose a job evaluation committee. There are two reasons for doing so. First, the committee should include several people who are familiar with the jobs in question, each of whom may have a different perspective regarding the nature of the jobs. Second, if the committee is composed at least partly of employees, the committee approach can help ensure greater employee acceptance of the job evaluation results.

So the composition of the committee is important. The group usually consists of about five members, most of whom are employees. Management has the right to serve on such committees, but employees may view this with suspicion. However, a HR specialist can usually be justified on the grounds that he or she has a more impartial outlook than line managers and can provide expert assistance. One option is to have this person serve in a nonvoting capacity. Union representative is possible. In most cases, though the union’s position is that it is accepting the results of the job evaluation only as an initial decision and is reserving the right to appeal actual job pricing decisions through grievance or bargaining channels. Once appointed each committee member should receive a manual explaining the job evaluation process, and instructions that explain how to conduct the job evaluation.

The evaluation committee performs three main functions. First, it usually identifies 10 or 15 key benchmark jobs. These will be the first jobs to be evaluated and will serve as the anchors or benchmarks against which the relative importance or value of all other jobs can be compared. Next, the committee may select compensable factors although the HR department will usually choose these as part of the process of determining the specific job evaluation techniques the firm will use. Finally, the committee performs its most important function –actually evaluating the worth of each job. For this, the committee will probably use one of the following methods; ranking job classification, point method, or factor comparison.

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