Fundamentals of Human Resource Management, 5/e

Job Evaluation Methods

Learning Objective 2

• Define and give an example of how to conduct a job evaluation and set pay rates.

Employers use two basic methods for setting pay rates: market-based approaches and job evaluation methods. Many firms, particularly smaller ones, simply use a market-based approach. This involves conducting formal or informal salary surveys to determine what others in the relevant labor markets are paying for particular jobs. The employer then uses this information to price its own jobs.

In contrast, job evaluation methods involve determining the “worth” to the employer of each of its jobs and then pricing these jobs. This process helps produce a pay plan in which each job’s pay is equitable based on what other employers ...