WSE

SHORT NOTES

M4

Job evaluation:

Job evaluation represent an effort to determine the relative value of every job in a plant and to
determine what the fair basic wage for such a job should be.

Objective of Job Evaluation

The objective of job evaluation is to determine which job should get more pay than others.

Gather information and data relating to job description, job specification and employee specification
of various jobs in the organizations.

To determine the hierarchy/ rank-based jobs in the organization.

To determine duties, responsibilities and demands of the job with that of other jobs

Job evaluation principles:

Job evaluation is concerned with jobs and not people, it is not the person that is being evaluated

Job evaluator needs to have a throughout understanding of the job

It is based on judgement and is not scientific

Job evaluation process:

1) Establish job evaluation objectives

2) Conduct job analysis
3) Job evaluation programme
4) Wage survey
5) Employee classification

Benefits of job evaluation:

1) Helps define relative worth of the jobs

2) Outcome is an equitable wage structure
3) Helps in evaluation of new jobs
4) Links pay with requirement of the job
Methods of job evaluation:

i. Ranking method: The ranking method is the simplest form of job evaluation. In this method,
each job as a whole is compared with other and this comparison of jobs goes on until all the
jobs have been evaluated and ranked. All jobs are ranked in the order of their importance
from the simplest to the hardest or from the highest to the lowest. The importance of order
of job is judged in terms of duties, responsibilities and demands on the job holder.

Ranking method is appropriate for small-size organisations where jobs are simple and few.
Ranking method being simple one can be used in the initial stages of job evaluation in an
organisation.

Merits:
1) It is the simplest method.
2) It is quite economical to put it into effect
3) It is less time consuming and involves little paper work

Demerits:

1) The main demerit of the ranking method is that there are no definite standards of
judgment and also there is no way of measuring the differences between jobs.
2) Not suitable for large number of jobs

ii. Grading Method: Under this method, job grades or classes are established by an authorised
body or committee appointed for this purpose. A job grade is defined as a group of different
jobs of similar difficulty or requiring similar skills to perform them. Job grades are
determined on the basis of information derived from job analysis.
The grades or classes are created by identifying some common denominator such as skills,
knowledge and responsibilities.
Once the grades are established, each job is then placed into its appropriate grade or class
depending on how well its characteristics fit in a grade. In this way, a series of job grades is
created. Then, different wage/salary rate is fixed for each grade.

Merits:
1) This method is easy to understand and simple to operate.
2) It is economical and, therefore, suitable for small organisations.
3) The grouping of jobs into classifications makes pay determination problems easy to
administer.
4) This method is useful for Government jobs

Demerits:
1) The method suffers from personal bias of the committee members.
2) It cannot deal with complex jobs which will not fit neatly into one grade.
3) This method is rarely used in an industry.
iii. Points Rating: This is the most widely used method of job evaluation. Under this method,
jobs are breaking down based on various identifiable factors such as skill, effort, training,
knowledge, hazards, responsibility, etc. Thereafter, points are allocated to each of these
factors. Weights are given to factors depending on their importance to perform the job.
Points so allocated to various factors of a job are then summed. Then, the jobs with similar
total of points are placed in similar pay grades. The sum of points gives an index of the
relative significance of the jobs that are rated.

Merits:
1) It is the most comprehensive and accurate method of job evaluation.
2) Prejudice and human judgment are minimised, i.e., the system cannot be easily
manipulated.
3) The scales developed in this method can be used for long time.
4) Jobs can be easily placed in distinct categories

Demerits:
1) It is both time-consuming and expensive method
2) It is difficult to understand for an average worker
3) A lot of clerical work is involved in recording rating scales.
4) it is not suitable for managerial jobs wherein the work content is not measurable in
quantitative terms.

iv. Factor Comparison Method:

This method is a combination of both ranking and point methods in the sense that it rates
jobs by comparing them and makes analysis by breaking jobs into compensable factors. This
system is usually used to evaluate white collar, professional and managerial positions.

To illustrate, a ‘toolmaker’ job is to be evaluated. After comparison, it is found that its skill is
similar to electrician (5), mental requirements to welder (10) Physical requirements to again
electrician (12), working conditions to mechanist (24) and responsibility also to mechanist
(3). Thus, the wage rate for the job of toolmaker will be Rs. 54 (Rs.5 + Rs. 10 + Rs. 12 + Rs.24
+ Rs.3).

Merits:
 1) It is more objective method of job evaluation.
2) The method is flexible as there is no upper limit on the rating of a factor
3) It is fairly easy method to explain to employees.
4) It facilitates determining the relative worth of different jobs.

Demerits:

1) It is expensive and time-consuming method.

2) Using the same five factors for evaluating jobs may not always be appropriate because
jobs differ across and within organisations.
3) It is difficult to operate.

Summary:

1) Factor comparison method: jobs graded by reference to market rate data and direct
comparison with jobs at or near the same level within the organization
2) Ranking method: whole job comparison is made to place them in order of importance
3) Grading method: jobs grades are defined and jobs are sorted into the grades by comparing
whole job description with the grade definition
4) Point ranking: separate factors are scored to produce overall points score for the job.

Job analysis:

Defined as the process of studying and collecting information relating to the operations and
responsibilities of a specific job.

The main focus of job analysis is on the job and not on the individual holding the job.

Job analysis is the process of determining all the necessary information about a particular job

Its outputs are –

a) job description – title, position, location, duties, reporting

it is defined as a statement that explains the job
b) job specifications – education, work experience, skills, personal characteristics
defined as a statement that indicated human qualifications necessary to do the job

Purpose of job analysis:

1) Recruitment and selection

2) Job designing
3) Training and development needs analysis
4) Performance analysis
5) Promotion and transfer
6) Employment
Benefits of job analysis:

1) Training and development needs

2) Recruitment and selection
3) Human resource planning
4) Health and safety

Difference between job evaluation and job analysis:

Job analysis: a systematic way of gathering information about a job

Job evaluation: beings with job analysis and ends at the point of determination of worth of a job.

Difference between job evaluation and performance appraisal:

Different methods of job analysis:

1) Observation method – the individuals performing the job are observed and relevant points
are notes
2) Interviews – applied when the job is complex
a) Individual interview
b) Group interview
3) Structured questionnaire – long and structured questionnaire to be filled in by job
incumbent
4) Log book/ work diaries – job incumbents take immediate note of the activities they perform
 5) Technical conference method – gathering information from the experts (usually supervisors)
and not the job incumbents
6) Critical incident technique – behaviour in specific situations contribute to the success or
failure of individuals, interviews and questionnaire can be used to collect the information on
the critical incidents

Job Design

Job design is the process of structing work and designating the specific activities at individual or
group levels

It determines the following:

1) Responsibility of an employee
2) His/her scope of decision making
3) His level of satisfaction
4) His productivity

It has two components:

1) Job content: includes various task to be performed by the job holder, the responsibilities
attached and relationship with other jobs
2) Job depth: it is the authority that the job holder enjoys in planning and organizing work

Different approaches of job design:

1) Engineering approach: task specialisation

2) Human relations approach: overspecialised jobs were redesigned to become more satisfying
and rewarding to employees (recognition, responsibility)
3) Job characteristics approach: identifies specific job characteristics that affect productivity,
motivation and satisfaction

Modern management techniques of jobs:

1) Job rotation: periodically assigning the employee to alternative jobs

2) Job enlargement: assigning workers additional same level activities
3) Flexitime: it allows the employees to choose their working hours
4) Telecommuting: it is the practice of working at home or while travelling, keeping in contact
with the office
5) Job sharing: two or more part time employees share the job of a full-time employee
6) Condensed work week: it involves compressing the work week by increasing the number of
working hours per day
 7) Work from home: employees work from home and visits office once or twice in a week

Classification of rewards:

1. Intrinsic and extrinsic reward: The satisfactions one gets from the job itself are its intrinsic
rewards. These satisfactions are self-initiated rewards, such as having pride in one’s work,
having a feeling of accomplishment, or being part of a team. On the other hand, extrinsic
rewards include money, promotions, and fringe benefits. Their common thread is that
extrinsic rewards are external to the job and come from an outside source, mainly,
management.
2. Financial versus Non-financial rewards: Rewards may or may not enhance the employee's
financial wellbeing. If they can do this directly through wages, bonuses, profit sharing, and
the like, or indirectly through supportive benefits such as pension plans, paid vacations, paid
sick leaves and purchase discounts. Nonfinancial rewards are potentially at the disposal of
the organization. They do not increase the employee’s financial position, instead of making
the employees life better off the job, non-financial rewards emphasize making life on the job
more attractive.
3. Performance based versus membership-based rewards: Performance based rewards are
merit pay rewards. Membership-based rewards are given in the form of benefits and services
provided to the company's employees. For example, it might be in the form of the annual
Christmas bonus, company retreat, upgraded office furnishing
Merit Rating of Employees: Definition, Concept and Objectives

Merit Rating is also known as performance appraisal or performance evaluation. It is a systematic

process for measuring the performance of the employees in terms of job requirements.

It utilizes various rating techniques for comparing individual employees in a work group in terms of
personal qualities or deficiencies and the requirements of their respective jobs.

It is an established fact that people differ in their abilities and aptitudes. These differences are
natural to a great extent and cannot be eliminated even by providing same training and education
facilities to them.

There will be some differences in the quality and quantity of work done by different workers even on
the same job. Therefore, it is essential for the management to know these differentials so that
employees having better abilities may be rewarded and the wrong selection and placement maybe
restricted or avoided.

It may also be ascertained by comparing the superiority of an employee over others.

Quantity and quality of work, attendance, obedience, skill, desire to learn, loyalty, family
background, personality, etc. are some of the factors that are taken into consideration in assessing
merit.

Methods of merit-rating:

1) Ranking:
Under this method, a man is compared with all others without considering any specific
factors. A rank is prepared by placing the best at the top and the poorest in performance at
the bottom. This method is simple and is suitable in case of small-scale concerns.

n (n-l)/2

N refers to the number of persons to be compared.

Suppose there are fifteen employees, the supervisor will have to make 105 comparisons i.e.,
15(15-1)/2. The method is suitable if the number of employees is less.

2) Grading
Under this method, the performance of the employees is evaluated against certain grades
such as poor, good, very good, excellent or outstanding, satisfactory or unsatisfactory. The
grade which describes his performance can be allocated to him
 3) Graphic Scales:

Under this method, performance of an employee is evaluated against certain specific factors.

4) Man-To-Man Comparison:

In order to reduce bias or prejudice of the evaluator, the merit rating under this method is
actually done by the HR Department. The supervisor simply reports the. Performance of the
employee by putting ‘Yes’ or ‘No’ against a series of descriptive phrases. The evaluator is not
aware of the weightage of these questions but he can definitely distinguish between positive
and negative questions.

5) Selection of Critical Incidents:

The act or conduct of an employee during crucial or critical circumstances is recorded by the
rater. These critical incidents are carefully analysed and the behaviour or qualities of the
employees are carefully rated

6) Forced Distribution Method:

Where there are a large number of employees, the rater may be asked to rate all the
employees as follows:
Poor 10%
Average 25%
Fair 35%
Good 20%
Excellent 10% Generally the rater does not want to rate the employees as poor or excellent
because in both the cases, he has to give reasons for justifying the rating.

CONCEPT OF WAGES

Wage and Salary Administration’ refers to the establishment and implementation of sound policies
and practices of employee compensation. The basic purpose of wage and salary administration is to
establish and maintain an equitable wage and salary structure. Wages and salaries are often one of
the largest components of cost of production and such have serious implications for growth and
profitability of the company

THEORIES OF WAGES

1) Subsistence Theory: This theory is also known as “Iron Law of Wages”. According to this
theory, if the wages fall below the subsistence level, the number of workers would decrease
as many of them would die of hunger, disease, malnutrition etc. This would make the wage
rates go up as labour will become scarce. However, if the workers are paid more than the
subsistence wages, they would marry and procreate. This would increase their number and
bring down the rate of wages.
 2) Wage Fund Theory: He assumed that wealthy persons have funds of surplus wealth, as a
result of their savings wages are paid out of these funds. If the fund was large, wages would
be high if it was small, wages would be low, just enough for the subsistence. Thus, the size of
the fund determined the demand for labour and the wages that could be paid.
3) Residual Claimant Theory: there are four factors of production namely, land, labour, capital
and organization. Wages represent the amount of value created in the production which
remains after payment of the other three factors of production namely land, capital and
organization.
4) Surplus Value Theory of Money: The price of any product was determined by the labour time
needed for producing it. The labourers were not paid in proportion to the time spent on job,
but much less. The surplus, thus created, was utilized for paying other expenses.
5) Marginal Productivity Theory: Wages are based upon the entrepreneur’s estimate of the
value that will probably be produced by the last or marginal worker. Workers are paid only
what they are economically worth
6) Bargaining Theory of Wages: wages are determined by the relative bargaining power of
workers or trade unions and of employers. When a trade union is involved, monetary
benefits, incentives, job differentials etc. tend to be determined by the relative strength of
the organisation and the trade union.

WAGE DETERMINATION PROCESS

Wage determination is a complex process. However, wage determination process consists of the
following steps:

1) Job Analysis
2) Wage Survey: In determining the wages for a specific job it is very necessary to work as to
what wages are being given for the same job in other enterprises.
3) Group Similar Jobs into Pay Grades: After the results of job analysis and salary surveys have
been received, the committee can turn to the task of assigning pay rates to each job, but it
will usually want to first group jobs into pay grades.
4) Price Each Pay Grade: The next step is to assign pay rates to pay grades. Assigning pay rates
to each pay grade is usually accomplished with a wage curve. The wage curve depicts
graphically the pay rates currently being paid for jobs in each pay grade, relative to the points
or ranking assigned to each job or grade by the job evaluation.
5) Correcting out of Line Rates: The average current pay for a job may be too high or too low,
relative to other jobs in the firm. If a rate falls well below the line, a pay raise for that job
may be required. If the rate falls well above the wage line, pay cuts or a pay freeze may be
required.
6) Developing Rate Ranges: Most employers do not pay just one rate for all jobs in a particular
pay grade. Instead, they develop rate ranges for each grade so that there might be different
levels and corresponding pay rates within each pay grade.
7) Wage Administration Rules: The development of rules of wage administration has to be done
in the next step. It is considered advisable in the interests of the concern and the employees
that the information about average salaries and ranges in the salaries of group should be
made known to the employees concerned;
TYPES OF WAGES

Different types of wage payment can be divided into three parts:

1. Time wage - In this type the worker is given remuneration according to time. This type of
remuneration may be per hour, per day or per month or per year.

2. Piece wage -: In this type of plan, a worker gets remuneration according to his output irrespective
of the time he takes in finishing his job.

3. Wage incentive plan - This type of wage payment is the combination of two types the above
referred. Efforts have been made here to obtain the advantages of both these types while avoiding
their disadvantages.

I. Halsey Premium Scheme: Under this scheme if a worker gives an output more than the
fixed standard job, he is given about 33% to 50% of the remuneration for that job as bonus

ii. Taylor’s Plan: Taylor plan is based on wages per unit. In other words, a worker is paid
wages in accordance with his output. Higher price rate is fixed for the workers who give
production over and above the standard workload fixed. The lower rate is fixed for the
workers who give production below the standard workload fixed.

iii. Gantt Plan: This is also a modified form of Taylor plan. In it, wages are fixed on the basis of
time. On the other hand, the efficient workers are given wages per unit. Thus, the workers
who give more output get their wages at enhanced rates.

IV. Emerson Plan:

1% bonus on 67.5 efficiency.

10% bonus on 90% efficiency.

20% bonus on 100% efficiency.

20% + 30% extra on bonus on efficiency more than 100%.

V. Profit-Sharing Scheme: Under this scheme, workers are given a certain percentage of
profits as bonus. But it suffers from one defect. Suppose, there is no profit in a particular
year. Workers will also not be given the bonus for that very year.

VI. Scalan Plan: Under this scheme, the workers are paid bonus equal to the percentage of
profits earned more than the profits earned last year by the organisation.