The hay pay method is based on job , each of which has a strict pay range.
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Share17 Jun 2022Job evaluation and market pricing Understand the fundamentals of job evaluation and market pricing, as well as how to choose and implement the right scheme for your organisation On this pageOn this page
IntroductionJob evaluation and market pricing help you gather internal and external data on roles in your organisation and equivalent jobs in other employers or sectors. Effective interpretation of this data is key to ensuring pay is both fair and competitive. Job evaluation and market pricing exercises need reviewing regularly to make sure they continue to meet changes to jobs, work and business needs. This factsheet introduces the fundamentals of job evaluation and market pricing. It provides guidance on choosing the right type of job evaluation scheme (analytical or non-analytical) and gives examples of the sorts of factors often assessed. It suggests issues for organisations to consider when implementing their chosen job evaluation scheme. It also outlines the different approaches to market pricing and offers information on the various sources of pay data. See the full A-Z list of all CIPD factsheets. What are job evaluation and market pricing?Job evaluation (JE) and market pricing assess the role, not the person doing it, and should be based on a fair, transparent system that is effectively communicated and understood by employees. Job evaluationAcas defines job evaluation as ‘a method of determining on a systematic basis the relative importance of a number of different jobs’. It's useful because job titles can be misleading, either unclear or unspecific, and in large organisations it’s impossible for people professionals to know each job in detail. JE is typically used when:
Market pricingMarket pricing is a way of collecting data on the pay rates for similar jobs in other organisations to establish their market rate and track movements in those rates. The aim is to set the employer's own pay rates at an appropriate level to recruit and retain those it needs. Although the concept of a market rate is common, there’s no such thing as an accurate single rate of pay for a job or role, and rates may vary within the same occupation and in the same location. It’s important to consider how to interpret the data collected and where the organisation wants to position its fixed pay and total remuneration levels in relation to the market. Internal and external approachesJE can be used to match jobs to enable market pricing to take place (although other approaches exist to compare jobs). However, there are tensions between JE and market pricing approaches. JE is internally focused - it ranks jobs and their relative importance within an organisation, whereas market pricing is externally focused - it aims to compare organisation pay rates with those in the wider labour market. Employers must resolve such tensions if they wish to ensure that pay rates remain both internally equitable and externally competitive. For example, where a job commands higher earnings in the external market than justified by an internal JE exercise, one approach is to top up earnings through temporary market supplements. Choosing and implementing JE schemesEmployers use JE schemes for various reasons, including the development of clear and orderly pay and grading structures, to help counter equal pay claims, and assist with market pricing where required. A single JE may be used to cover the whole workforce or employers may operate different schemes for varying groups of employees. The former approach is often favoured as it helps counter any potential equal pay issues. Types of job evaluationThere are two main types of JE: analytical schemes, where jobs are broken down into their core components, and non-analytical schemes, where jobs are viewed as a whole. The use of analytical schemes is more popular because of its ability to help provide a defence against equal pay claims. Analytical schemesThese can offer greater objectivity in assessment as the jobs are broken down in detail. Examples of analytical schemes include ‘points rating’ and ‘factor comparison’ approaches.
Non-analytical schemesThese are less objective than analytical schemes, but are often simpler, cheaper, and quicker. Methods include: job ranking; paired comparisons; and job classification.
Developing JE schemesWhether adopting an analytical or a non-analytical approach, organisations have three main options over scheme design and development:
Approaches to market pricingMarket pricing exercises involve the use of some form of job matching to enable pay rates in the organisation to be compared with equivalent jobs in other employers, with a view to setting appropriate rates to attract and keep staff. A range of options for comparing jobs exists from basic analysis using job titles or job descriptions through to the use of JE schemes. Employers must also decide what type of reward they wish to compare, for example, basic salary, total earnings (including bonuses, location allowances, and so on) or the wider package (including such elements as pension provision, private medical insurance, and so on). Gathering pay dataGiving jobs a ‘price’ is a separate exercise to the job matching process, requiring the gathering of appropriate pay and benefits data. Sources of pay data can also vary from specifically collected survey information to more general commercial data. Data sources are not mutually exclusive. For example:
Market pricing exercises may assume that comparable pay data exists that is easily obtainable and accurate. This isn't always the case. For instance, some roles may be so specialised that few, or even no, external comparators exist, and assumptions must be made about ‘comparable’ job content, which may compromise data accuracy. Choosing a pay policyBecause employees have varying skills, attributes and abilities, and employers themselves vary in terms of their cultures, performance and ability to pay, there's often a range of pay rates in the market, even for the same jobs. Therefore, an organisation must decide where it wants to position itself in the labour market to achieve its business and staffing objectives. For example, pay policies might be positioned to pay at the median level for the sector, occupation, or locality. Others might use market data to feed into reference points in pay ranges, with rates for individual employees set according to factors such as performance - see more on performance-related pay. Organisational practiceThere's very little published information on organisations’ market pricing practices. In general, private sector companies tend to benchmark against their own industries, and against companies of similar size (internationally as necessary). They also often ‘age’ pay information up to a common date by applying a multiplier based on annualised salary movements, although such approaches are not invariably accurate. Some companies match generic jobs to a management consultancy database. Sources of pay dataFor benchmarking purposes, there are four main sources of pay data:
Further readingThe main providers of publicly available UK pay settlement data are:
A wide range of official UK data on pay rates (including detailed breakdowns by factors such as occupation and region) and earnings trends – for example, the Annual Survey of Hours and Earnings (ASHE) – is also available from UK National Statistics. Books and reportsARMSTRONG, M. (2018) Armstrong's job evaluation handbook: a guide to achieving fairness and transparency in pay and reward. London: Kogan Page. E-REWARD (2017) Job evaluation in the UK: provisional findings from E-reward survey. E-reward website. PERKINS, S.J. and WHITE, G. (2020) Reward management: alternatives, consequences and contexts. 4th ed. London: Chartered Institute of Personnel and Development. WORLD AT WORK. (2020) Job evaluation and market pricing practices. Available to WorldatWork members on their website. Visit the CIPD and Kogan Page Bookshop to see all our priced publications currently in print. Journal articlesARMSTRONG, M. and BROWN, D. (2017) Job evaluation versus market pricing: competing or combining methods of pay determination? Compensation & Benefits Review. Vol 49, No 3. pp153-160. GILBERT, K. (2012) Promises and practices: job evaluation and equal pay forty years on! Industrial Relations Journal. Vol 43, No 2, March. pp137-151. JOHNSON, P., MCMULLEN, T. and ROYAL, M. (2015) Job evaluation: relevant, robust and reimagined. Workspan. Vol 58, No 9, September. pp26-30,32. TORRENCE, M. (2019) Gather, measure, repeat. TD: Talent Development. Vol 73, No 2, February. pp65-68. CIPD members can use our online journals to find articles from over 300 journal titles relevant to HR. Members and People Management subscribers can see articles on the People Management website. Download factsheet This factsheet was last updated by Charles Cotton: Senior Performance and Reward Adviser, CIPD Charles directs CIPD’s research agenda and public policy on performance and reward. He speaks for CIPD at government consultations on topics such as, pensions, retirement, CEO remuneration, low pay and employee tax. Explore our related contentFactsheets Outlines the main characteristics of strategic and total reward, and looks at designing and implementing a reward strategy across the organisation Factsheets Introduces the basics of reward, which includes pay and benefits, and outlines the UK legal position Factsheets Outlines the purpose of pay structures and progression, including the common ways of structuring pay and of determining, reviewing and controlling pay progression Reports The CIPD’s eighteenth reward management survey reveals the UK benefits landscape and highlights the importance of employee financial wellbeing
People Management PM jobs Copyright © The Chartered Institute of Personnel and Development 2022. Incorporated by Royal Charter, Registered Charity no. 1079797 Which pay system uses a tiered system of pay ranges based on know how problem solving and accountability?One example is the Hay point method system, which uses only three factors and measures the degree that these three factors are required for each position. The Hay system factors are know-how, problem-solving ability and accountability.
When two or more people split a full time job is called?A job share arrangement is a full-time job split between two individuals, each with responsibility for the success of the total job. Job sharing allows two staff members to share the responsibilities of one full-time position, typically with prorated salary and paid time off.
What three factors must be present in performance standards?Let's discuss the three primary factors that companies should emphasize to improve employee performance.. Training and Development.. Employee Engagement.. Company culture.. Which of the following is the most important advantage of using internal sources to hire from within?Internal recruitment is when a business chooses only to advertise a job within their company or only make it available to current employees. The main advantage is that it can save time and money, but it can also serve as a way to develop and motivate employees within your organization.
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