Job evaluation under the microscope

Although job evaluation first emerged in the 1920s it has had a mixed history and has, to a certain extent, been a victim of both its frequent misuse and a common misunderstanding. Numerous schemes have arisen and, all but a few, have singularly failed to differentiate jobs in a precise and equitable way. We shall not review these here, but just indicate that, in our view, systems based on job matching, paired comparison, job families, and benchmark grading are far too crude to produce accurate distinctions in job “size”, and are also highly vulnerable to the hidden prejudices of those who apply them.

It was not until the 1950s that sophisticated systems emerged. The way was led by US consultants Edward N Hay and Dale Purves, who developed their Guide Chart Method. Today this remains the most widely used factor and points-based method in the World, used by over 7,000 companies in around 40 countries. Also in the 1950s came the research of psychologist Elliot Jaques into a concept he called “Time Span of Discretion”. According to Jaques, the complexity of a job can be measured by looking at the kind of tasks principally undertaken by a jobholder. He therefore sought to measure “the length of time that a person can work, into the future, without direction, using their own discretionary judgment” – the longer the period, the bigger the job.

Although job evaluation has been found to be effective as a general salary management tool, it has become increasingly essential as an approach to make objective assessments in order to ensure gender-based equal pay. This is because equal pay laws, particularly in the USA and Europe, have moved away from a concept of “equal pay for those in the same job” to equal pay for jobs of “equivalent worth”. Thus, an employer is increasingly obliged to use job evaluation schemes to determine the relative “worth” of two jobs that may not be in the same function or even location. This requirement is widening to cover those with a wider range of protected characteristics.

The pioneering US New Jersey Equal Pay Act now in force bans employers from paying “any of its employees who is a member of a protected class at a rate of compensation, including benefits, which is less than the rate paid by the employer to employees who are not members of the protected class for substantially similar work, when viewed as a composite of skill, effort and responsibility”. The protected characteristics go beyond gender to include race, ethnicity, religion, civil union status, disability, and age. The penalties include triple compensation, punitive damages, attorney and other costs, and the statute of limitation has been extended from 2 to 6 years.

Back in 2000–2004, various studies indicated that job evaluation schemes were used by between 40% and 50% of all multinationals and an even higher proportion of public sector employers. Since 2010, new market entrants to the field have included Deloitte, and today around 75% of large employers in the UK use some form of scheme. In spite of the growing likelihood of the New Jersey law extending to other US States, the majority of US employers now prefer a “market pricing” approach. In the literature, job evaluation is commonly regarded as a system for ensuring internal equity, as opposed to the outward orientation of market pricing. However, they do not have to be in opposition. For instance, Hay has long conducted the salary survey based on its points-based system, whilst FedEE has, since 2007, operated its JEAPS system that integrates them both in a sophisticated, yet very simple way.

Over the longer term there will be a greater hill to climb for compensation professionals. In the USA, the DOJ and FTC are only slowly getting into gear with their antitrust actions against colluding employers. The initial focus has been on no-poaching agreements between employers, with a $54.5M fine already for Duke University. However, the Antitrust Guidance for HR published in 2016 also covers collusion concerning pay, and there are the first signs that the DOJ is looking at sectoral pay clubs and salary surveys to target. In Europe, Articles 100–103 of the Treaty of the Functioning of The European Union also cover anticompetitive issues and could well swing against salary collusion and even label sectoral collective agreements as wage cartels. The merits of job evaluation schemes will come under greater scrutiny in the context of such trends and the more salary market readings are based on objective measures of job size, especially to underpin equal pay policies, the less they will come under scrutiny due to antitrust concerns.

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