7 Jun 2021
Job 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
Introduction
Job evaluation and market pricing help HR teams gather internal and external data on the
roles in their organisation and equivalent jobs in other employers or sectors. Interpreting
this data effectively is key in 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 nonanalytical) 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.
What are job evaluation and market pricing?
Job evaluation 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 evaluation
Acas 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.
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Job evaluation is typically used when:
Determining pay grades in pay structures.
Ensuring a fair pay system.
Comparing pay rates against the internal or external job market.
Market pricing
Market pricing, also known as pay benchmarking, 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 the staff it needs.
Although the concept of a market rate for a job 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 for employers 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 approaches
Job evaluation can be used as a way of matching jobs to enable market pricing to take
place (although other approaches exist to compare jobs). However, there are tensions
between job evaluation and market pricing approaches.
Job evaluation has an internal focus as it ranks jobs and their relative importance within
an organisation, whereas market pricing has an external focus as it aims to compare
organisation pay rates with those in the wider labour market.
Employers need to 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 job evaluation
exercise, one approach is to use temporary market supplements to top up earnings for
that role.
Choosing and implementing job evaluation
schemes
EEmployers operate job evaluation schemes for various reasons, including the
development of clear and orderly pay and grading structures, to help counter equal pay
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claims, and assist with market pricing where required.
A single job evaluation may be implemented to cover the whole workforce or employers
may operate different schemes for varying groups of employees. The former approach is
often favoured as this is likely to help counter any potential equal pay issues.
Types of job evaluation
There are two main types of job evaluation: 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 the capacity to help
provide a defence against equal pay claims.
Analytical schemes
These 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.
Points rating – the key elements of each job, which are known as ‘factors’, are
identified by the organisation and then broken down into components which may
also be weighted. Each factor is assessed separately, and points are allocated
according to the level needed for the job. The more demanding the job, the higher
the points value. Examples of factors commonly assessed include:
knowledge and skills
people management
communication and networking
decision-making
working environment
impact and influence
financial responsibility.
Our 2019 Reward management survey showed some of the more common factors
used by employers to help them determine which jobs go within their pay grades.
Factor comparison is also based on an assessment of factors, though no points are
allocated. This method is used less commonly than ‘points rating’ systems as the
latter approach enables many jobs to be ranked at a time.
Non-analytical schemes
These are less objective than analytical schemes, but are often simpler, cheaper and
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quicker. Methods include job ranking, paired comparisons and job classification.
Job ranking puts jobs in an organisation in order of their importance, or the level of
difficulty involved in performing them or their value to the organisation.
Paired comparisons compares each job in turn with another in an organisation.
This takes longer than job ranking as each job is considered separately.
Job classification also known as job grading. Before classification, an agreed
number of grades are determined, usually between four and eight, based on tasks
performed, skills, competencies, experience, initiative and responsibility. Clear
distinctions are made between grades. The jobs in the organisation are then
allocated to the pre-determined grades.
Developing job evaluation schemes
Whether adopting an analytical or a non-analytical approach, organisations have three
main options over scheme design and development:
A scheme may be developed in-house.
A consultancy’s off-the-shelf package may be purchased.
A consultancy may tailor its package to suit the organisation’s needs.
The system selected will depend on the size of the organisation and the aim of the job
evaluation exercise. The Korn Ferry Hay Group Guide Chart–Profile method a widely-used
scheme, but other large independent consultancies also offer job evaluation services.
Many consultancies also offer schemes that operate in the UK public sector, including:
JEGS (Civil Service Job Evaluation and Grading Scheme)
HERA (Higher Education Role Analysis)
National Joint Council (NJC) for Local Government Services
Agenda for Change job evaluation scheme (NHS).
Other factors to consider
Job evaluation can be a complex and time-consuming task and many organisations draw
on externale expertise to help. The key issues to consider include:
The process is often as important as the results.
Becasue jobs and work change, job evaluation is an ongoing process.
An appeals procedure should be established before the evaluation begins.
Clear, detailed and up-to-date job descriptions must be available or created.
The more complex the scheme, the more detailed the job description needed.
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Accurate records of decisions must be kept, and kept securely.
The results must be checked to see if there are any pay anomalies.
Effective communications are essential, as employees may have concerns over their
future job grading and pay.
Individuals making decisions on job roles must be impartial and trained to use the
chosen system.
Approaches to market pricing
Market 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
job evaluation 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 data
Giving 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:
National survey data might help set and maintain pay structures and rates for
management grades.
Locally collected data might be useful to set rates for secretarial, clerical and process
staff.
Occupation-specific data can help inform pay decisions for groups such as
marketing staff or accountants.
Market pricing exercises may assume that comparable pay data exists that is easily
obtainable and accurate. This is not always the case. For instance, some jobs 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 policy
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Because employees have varying skills, attributes and abilities, and employers themselves
vary in terms of their cultures, performance and ability to pay, there is often a range of
pay rates in the market, even for the same jobs. Therefore, people professional must help
thier organisations 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 practice
There’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
databases 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 data
For benchmarking purposes, there are four main sources of pay data:
Published data from pay surveys and similar organisations can give some indication
of going rates. The degree to which this data is useful is limited because of problems
in comparing like with like, but they can help with periodic reality checks on levels
and movements, and are particularly valuable sources of data on specific
occupations or localities.
Pay clubs of employer groups that regularly exchange information on pay levels.
These generally only allow participants access to the data.
Special surveys funded by individual organisations from specialist pay consultancies
but access is usually limited to the contractor and participants.
Consultants’ pay databases containing data collected on a systematic or ad hoc
basis that they relate to the results of their job evaluation schemes to compare pay
rates across organisations on a common basis: this ability is one of the attractions
of job evaluation for many organisations. To be viable it is important that the factors
measure common job/role characteristics and can enable comparisons to be made
across different jobs/roles and organisations; the data is based on an adequate
sample; and the job analyses are carried out systematically and conscientiously.
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The main providers of publicly available UK pay settlement data are:
CIPD’s Labour Market Outlook pay predictions.
Croner Salary Surveys – sector, function and regional surveys.
Incomes Data Research – pay review data.
Labour Research Department (LRD) pay surveys – collective pay agreements.
XpertHR Cendex – private and public sector pay reviews.
MakeUK (fornerly EEF – the manufacturers’ organisation) – manufacturing pay
settlements.
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.
Further reading
Books and reports
ARMSTRONG, 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. Ereward 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 articles
ARMSTRONG, 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
© Copyright Chartered Institute of Personnel and Development 2021, 151 The Broadway, London SW19 1JQ, UK
Incorporated by Royal Charter, Registered Charity no. 1079797 123 Page 7 of 8
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.
This factsheet was last updated by Charles Cotton.
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