Job evaluation (JE) 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.

JE 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 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 those it needs.

Although the concept of a market rate 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 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

JE can be used to match jobs to enable market pricing to take place (although other approaches exist to compare jobs). However, there are tensions between JE and market pricing approaches.

JE is internally focused - it ranks jobs and their relative importance within an organisation, whereas market pricing is externally focused - it aims to compare organisation pay rates with those in the wider labour market.

Employers must 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 JE exercise, one approach is to top up earnings through temporary market supplements

Employers use JE schemes for various reasons, including the development of clear and orderly pay and grading structures, to help counter equal pay claims, and assist with market pricing where required.

A single JE may be used to cover the whole workforce or employers may operate different schemes for varying groups of employees. The former approach is often favoured as it helps counter any potential equal pay issues.

Types of job evaluation

There are two main types of JE: 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 its ability 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. 
• 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 - this approach is also based on an assessment of factors, though no points are allocated. This method is used less commonly as the 'points rating' 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 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 these pre-determined grades.

Developing JE 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.

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 JE 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 isn't always the case. For instance, some roles 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

Because employees have varying skills, attributes and abilities, and employers themselves vary in terms of their cultures, performance and ability to pay, there's often a range of pay rates in the market, even for the same jobs. Therefore, an organisation must 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 information 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.

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 it's 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 useful sources of data on specific occupations or localities.

• Pay clubs - employer groups that regularly exchange pay information. These generally only allow participants to access 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.

The main providers of publicly available UK pay settlement data are:

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. E-reward 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 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.