Job Evaluation, Market Pricing & Pay Structures Term Paper

Job Evaluation, Market Pricing & Pay Structures - Term Paper Example Job evaluation approach Job evaluation approach to set pay range ranks the job on the basis of responsibilities and duties expected by the position to perform. This evaluation technique helps the organization to select a pay grade that is a pay range with minimum and maximum rate. This approach evaluates a job on the basis of four factors which are skills possessed by the individual, efforts made by the individual, responsibilities performed by the individual and working conditions of the individual (Armstrong, 2007). (Jenss & Associates) On the basis of above factors organizations design pay structures, although there are many variations in this process but all organizations using this techniques follow the same approach which is to define each job in the group on the basis of above discussed generic factors. The first step in this approach is to decide which job to be covered in the evaluation and what factors are to be used to evaluate, second step is to gather information about e ach job to be evaluated, third step is to rate each job evaluation factors of the job, and the step four in the process is to select the benchmark jobs among jobs selected for evaluation which connects internal pay structure with external labor market (Armstrong, 2007). ... This method is quite expensive, complex and hard to understandable for employees. The major drawback of this approach is that it rewards tenure and efforts rather than outcomes and performances which are quite unjustifiable (Armstrong and Brown, 2001). Market pricing approach Market pricing approach sets pay scale according to the prevailing market rate of the pay for similar job, this approach is the most dominant and common way organizations use to determine pay scales. Evolution of this method to sets pay scale has shifted the organization’s focus from internal methods to use market data to sets pay scale. This approach place jobs in grades based on the level of competitive pay for different jobs, in this way it also decreases the level of grades and makes the job and pay structure simple (Armstrong, 2007). This method sets pay scale for selected job position and its description on the prevailing market rate. In this way organizations stay competitive and are able to retain their employees for long. This approach is comparatively less expensive and easily understandable for employees, this approach also reduces disputes between employees regarding pay scale. It evaluates jobs on results and accountability rather than efforts and tenure (Heneman and LeBlanc, 2002). There is a major drawback with this approach; if the market data is not available for the job position for which pay scale needed to be set than it becomes very hard and complicated for the organizations to set pay scale; Secondly this approach can result in statistical errors such as to place the job in wrong grade; thirdly this approach is highly dependent upon market survey, any lacking or error in the survey can result in disaster and wrong placement of jobs.