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Unit 6: Compensation and Rewards

Objectives Notes

After studying this unit, you will be able to:

• Discuss the job evaluation
• Explain the wage and salary administration
• Describe the national wage policy

Introduction

Job evaluation is concerned with assessing the value of one job in relation to another, for
it is only when each job has been properly evaluated that a sound wage structure can be
built. Job evaluation is the output provided by job analysis. It uses the information in job
analysis to evaluate each job for a suitable compensation. It is a formal and systematic
comparison of jobs in order to determine the worth of one job relative to another.
Increasing complexity and rapid changes in the business environment mean organizations
today must rethink their compensation and reward strategies for a number of
reasons — and do so more frequently than in the past. Moreover, they can no longer look
at compensation strategy in a vacuum, but must also consider the role of other rewards in
supporting their business and workforce objectives:
Talent Management Issues: Updates in an organization’s compensation and overall reward
strategy may be called for to meet a need to attract, retain or engage talent in roles or
functions that have new or increased significance for the business (e.g. sales or R and D) at
a specific organizational level (e.g., executive) or, even more broadly, in a cross-functional
category (such as the high-performer/high-potential group).
Changing Business Strategy: With changes in leadership or strategy, organizations may need
to realign compensation and other rewards for some or all roles to support the company’s
ability to retain/engage the right talent and focus on critical new business objectives.
The M and A Rationalization: Most significant corporate transactions prompt a need to
integrate or revise compensation and reward strategies to ensure that the business objectives
of the transaction can be met quickly and efficiently.
Cost: In situations where organizations need to manage compensation costs more effectively
to ensure, for example, that variable pay programs are truly aligned with performance and
business strategy. The solution must also consider the implications for other reward programs
and how the total reward package can more efficiently deliver value to the organization.

6.1 Job Evaluation

6.1.1 Definition of Job Evaluation
Kimball and Kimball define job evaluation as “an effort to determine the relative value of
every job in a plant to determine what is the fair basic wage for such a job should be”. Wendell
French defines job evaluation as “a process of determining the relative worth of the various
jobs within the organization, so the differential wages may be paid to jobs of different worth”.

The British Institute of Management has defined job evaluation as “the process of analysis
aid assessment of jobs to ascertain reliably their relative worth, using the assessment as a
basis for a balanced wage structure”.
The ILO defines job evaluation as “an attempt to determine and compare demands which
the normal performance of a particular job makes on normal workers without taking into
account the individual abilities or performance of the workers concerned”.

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