Page 127 - DCOM202_COST_ACCOUNTING_I

Unit 6: Labour Cost

a matter of fact, job-evaluation seeks to provide for a fair and equitable wage structure based Notes
on the assumption that each job should be paid according to its contribution to the value of the
finished product and to the long-term success and progress of the organisation. In brief, the main
advantages of job evaluation are as follows:
(i) It helps in avoiding the inconsistencies and inequalities of wages. It is a logical plan for job
grading as well as for their mutual comparison.
(ii) Job evaluation brings uniformity and justice in wage rates. Hence, it lessens the disputes
arising from wages. It provides such wage rates which are easily acceptable to the
employees.
(iii) Good wage payment plans, well-administered, have a salutary effect on the entire
industrial organisation. Employees are happier in their work, morale is higher output is up
and quality of production is better. Job evaluation helps a lot in this process.
(iv) For job evaluation, the work of job analysis is done and job descriptions are prepared.
Hence, the informations collected at that time are useful for the comparable studies of jobs,
selection, transfer and promotions.
(v) This method helps to settle the wages for new jobs under present framework and rules.

Methods of Job Evaluation

There are different methods of evaluation of jobs. The following are the important methods of
job evaluation:
(i) Ranking Method: Under ranking method, jobs are graded from lowest to highest according
to relative requirements and responsibilities. Each job is valued in terms of the other and a
wage rate is fixed depending upon the rates prevailing in the locality.
(ii) Grading Method: According to grading method, a number of grades are fixed and arranged
in order of importance, e.g., unskilled, semi-skilled, skilled, supervisory and administrative.
Jobs are reviewed and then placed in the corresponding grades according to requirements.
Pay scales are fixed for each grade.
(iii) Points Value Method: According to point’s value method, each job factor is given a relative
weightage and is allotted a number of points. While assigning points, various factors for
performing a job are taken into account. The jobs are ranked in the order of points scored
and are placed in a number of arbitrary grades. The scale of wage is fixed for each of these
grades. This method is slightly difficult to understand and operate and this is costly but it
is accurate.

6.5 Merit Rating

Merit rating refers to a systematic analysis of merits of employees according to certain
characteristics to ascertain the worth of each employee or a suitable class of them relative to
all others. Certain factors are taken into account in rating merits of employees and points are
assigned under each of these factors. Following are the main factors of merit rating:
(i) Quality of work,
(ii) Sense of responsibility,
(iii) Quantity of work,
(iv) Initiative and effort,

(v) Discipline,

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