MaRS Library Job evaluation: Tailoring compensable factors for your startup
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Read the highlights
A job evaluation plan:
- Helps your startup determine the internal value of a job so you can assign the appropriate salary level (use benchmark data to ensure the pay aligns with the same job’s worth externally)
- Defines the compensable factors (e.g., skills, responsibilities, working conditions) to assess the relativity of jobs within a company
- Is required by pay equity legislation in Ontario for all organizations with 10 or more employees
A job evaluation plan is a tool that helps your startup determine the internal value of a job in order to assign the appropriate salary level. The job evaluation plan defines the compensable factors used to assess the relativity of jobs within an organization. The job relativity can be aligned with the external worth of the same jobs by reviewing benchmark data (described in more detail below).
Primary compensable factors of a job evaluation plan
The point factor method is the most commonly used approach to job evaluation.
This method identifies four primary compensable factors used to determine pay. These factors include:
- Skills (years of experience, level of education and overall ability)
- Responsibilities (number of direct reports, fiscal accountability and the list of responsibilities of the position itself),
- Mental and physical effort (degree and amount of concentration, level and frequency of physical effort)
- Working conditions (overall environmental factors such as location, hazards and any extreme factors)
Tailoring the compensable factors for your startup
When identifying compensable factors, ensure that employees as well as management are part of the job evaluation process so that you gain their buy-in.
To be useful in comparing jobs, compensable factors should possess the following attributes:
- They must be present in all jobs
- They need to be definable and measurable
- The factor must vary across the company. A factor found in equal amounts in all jobs would not have value as a basis of comparison
- They must be observable. Compensable factors can be thought of as the job-related contributions of employees
- They need to fit the organization. Organizations design jobs to meet their goals and to fit their technology, culture and values
Creating a job evaluation plan
A job analysis describes a job. A job evaluation involves a means to compare jobs in terms of what the organization wants to “pay for” or to decide what is of value to them. Creating a job evaluation plan involves a number of steps:
- Collect job information: Record information about the position in a job description template. If your startup includes competencies in the job definition, add these to the job description.
- Develop the method: Using an “off-the-shelf” point factor system as the basis for the plan is recommended for small organizations. (This system can then be fine-tuned to reflect any specific nuances from a job value perspective—see
- Fine-tune the compensable factors: This is the heart of job evaluation. Not only do the compensable factors rank the job within the organization’s job hierarchy, but they also clearly outline what the company values and will pay for. It is important that each factor be clearly defined and weighted according to company and industry practices.
- Review the job analysis: Have each job description reviewed by a manager, and, if possible, a member of your talent management team, to rank each compensable factor.
- Develop a job hierarchy: By comparing and aligning jobs internally as part of the job evaluation process, you develop a job hierarchy. Typically this can be determined with two or three employees who understand the company’s mandate and business plan.By reviewing the job evaluation points that each job has and by grouping jobs in similar point bands, the job hierarchy takes the form of a levelling system.
If your startup has 10 jobs and four jobs have 100 to 250 points, with four others having 250 to 400 points and the last two having 400 to 600 points, you would have three point bands.
This would equate to three job levels in the hierarchy. It is possible to have many point bands, but 10 is usually enough for even large organizations.
- Create the salary ranges: Price the job structure and create salary ranges by aligning the job hierarchy with benchmark jobs in compensation surveys. This would create a market rate for each job level that can be used to determine salaries for each individual in the job. A salary range could be created around this market rate based on varying levels of experience and performance.
Ontario pay equity legislation and job evaluation requirements
All organizations in Ontario with 10 or more employees are responsible to ensure that they meet Ontario’s pay equity legislation, so it is necessary for even small companies in the province to have a job evaluation plan. Having a job evaluation plan will enable you to compare female and male jobs according to their job value, to ensure pay equity. Another method of job evaluation, market pricing, while easier to implement, does not meet Ontario’s Pay Equity Act requirements without the addition of an internal job-based valuation system.
Getting started with job evaluations at your startup
Job evaluation is often seen as a cumbersome, complicated and time-consuming process, especially for small companies without a human resources (HR) staff to support it. Employees may regard it as a “black box” that generates a mystifying salary rate. The good news is that with some guidance, the job evaluation process can be simplified and understood by executives and employees. If you are unsure where to start, create standard job descriptions for each employee that include the compensable factors mentioned above. This will act as the foundation for your job evaluation plan. It is highly recommended to seek the advice of an HR professional who has experience with job evaluation.