Job evaluation and Compensation plans

The widely accepted financial incentives to employees in most of the organizations are conceptualized as wages and salaries. Obviously, monetary incentives are meant for the satisfaction of primary needs as well as the secondary needs. As individuals organize mainly to fulfill their personal needs it is important that they are compensated fairly. The very first problem in wage and salary administration is the setting up of the base compensation for jobs, assigned to individuals. To keep organization running and to attract and retain required personnel, there should be methods available to rate jobs for equitable reward. Job evaluation is the method used for comparing all the jobs within the organization and for obtaining internal and external consistency in wages and salaries.

Job evaluation:

There is considerable ambiguity among the terms job evaluation, job analysis, job description and job specification. Job analysis is the collection of data and the critical evaluation of the operations, duties and relationships. Job description is the written record of duties, responsibilities and requirements of a particular job. While job specification, is written statement showing the aptitude qualification, experience etc that would be necessary to perform a particular job. Another result of job analysis is job evaluation. The concept of job evaluation has altogether different meaning. Strictly speaking, job evaluation is the method of precisely fixing the relationships between jobs and wage rates. In the simplest words, job evaluation is the rating of jobs according to their worth.

Different authors have dealt with the definition of the term in their own way. To define it in a concise manner we can say job evaluation is the systematic, analytical scrutiny of all the jobs in the organization, with a view to compare all the jobs among themselves and to rate them according to the requirements. The main purpose of job evaluation is to maintain the consistency in wage rates, i.e. a senior foreman should be paid more than a shift foreman.

The rationale behind job evaluation is to reward employees fairly, which helps the organization to attract and retain them. On the part of employees it provides them the motivation for the betterment of performance and their effectiveness. Equitable compensation relates to the problem of attracting and retaining employees which motivation directly refers to the monetary and non-monetary incentives.

Equity and justice coincide according to natural law. It is clearly experienced that greater the feelings of equity, the more will be the equilibrium. When the employee receives compensation, his equity perception is affected by two factors (1) Effort output ratio i.e. what are the inputs given by employee in terms of physical and mental effort, training, education and how he works and furnishes task and how they are rewarded. Thus compensation to the work accomplished by employee has great impact in the future performance and it also shows an impact on the mental adjustment.

If the ratio is low, it leads to dissatisfaction which results in low performance, less effectiveness and low productivity. On the other hand, high ratio can also lead overall dissatisfaction arising out of over payment. Employee will feel guilty and try to work more to show that he actually deserves. So equity concept balances these extremes and accordingly gives a rational basis to work out the wages and salaries. (2) The comparison of above ratio with other person’s ratio with whom he has direct contact.

Even any change in working condition, or environmental change would not raise productivity of dissatisfied group. Herzberg concluded that the pay is not the motivator of employee behavior. However, the equity concept indicates that more often than not it (the problem) is not the inability of pay to motivate but it is problem of improper design of a wage plan.

Earth is round – the same way we have come at the point where we left the discussion of job evaluation. So job evaluation is that system which decides the equitable compensation to the employees by keeping in mind the common wage structure of industry. Job evaluation always intends fair reward with an aim to raise productivity, efficiency etc. There is every possibility, in practice, that after application of the system some may get high pay, while others may not. This fact, however, does not undermine the importance of job evaluation. It would therefore, be useful to discuss various techniques available for job evaluation. But rather than going straight tothat point, what type of role trade union plays in working out the system, should also be seen.