Pathways to Research BUSINESS

Job Evaluation
A Step-by-Step Guide for Designing and Implementing
the Point Factor Method
 By Hadi El-Farr
March 2023

Introduction
Job evaluation is the process of deciding on the comparative worth of jobs within an
organization (Berrocal et al., 2018). Therefore, job evaluation is a starting point to
designing a compensation system, focusing on internal equity when differentiating
pay among employees. It is commonly accepted that jobs vary in terms of pay,
reflecting—among other factors—the experience, skills, responsibility level, and
impact of each job within the context of organizational performance. Job evaluation
is the rational process to ensure that the differentiation in pay is fair, objective,
transparent, and procedurally consistent, resulting in a hierarchy of jobs based on
their importance and value added to the firm (Koziol and Mikos, 2020; Kutlu et al.,
2013).
It is noteworthy that the process focuses on jobs and not individual employees
(incumbents), where remuneration of several employees within the same job might
vary within the pay range assigned for each job. In practice, there are four common
methods for job evaluation that focus on internal equity. The first two, job ranking
and job classification, are qualitative methods that highly depend on the judgment
of decision-makers, while the second two, factor analysis and the point method, are
quantitative methods that aim to minimize subjectivity through measurable stan-
dards in deciding on jobs’ comparable worth (Berrocal et al., 2018). Note that other
methods focus on external equity when deciding on pay, such as market pricing,
where each job is priced relative to what it is paid in the labor market, based on pre-
determined managerial criteria. That said, in practice, decision-makers consider
both internal equity and external equity when evaluating jobs, and therefore, often
take a hybrid approach.
In this article, we will focus on the point method, which is a quantitative method
that assigns points for each job. Points are awarded based on predetermined weights
and scales for several compensable factors, and the sum of the points for each job
will result in its comparable worth. This method is the most common in the private
and public sectors, and although it has been used since the early twentieth century,
it has not changed significantly (Kilgour, 2008). Mainly, its wide adoption is due to
its several benefits, including its high acceptability and perceived objectivity. This

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paper aims to demonstrate how to design and implement the point method through
a step-by-step process, which is summarized in Figure 1.

STEP
Form the task force
01

STEP
Select compensable factors
02

STEP
Define compensable factors
03

STEP Determine scales and define the

scale degrees for the compensable
04 factors

STEP Assign weights and points to

05 compensable factors

STEP Assess jobs based on the point

06 manual

STEP Draw the organization’s wage

line and consider the market
07 wage line

STEP Group jobs with comparable

08 scores into job grades

Figure 1: Point method step-by-step process.

Step 01: Form the Task Force

Like all methods, point factor job evaluation requires a task force to design the sys-
tem. Particularly, its task is to define and apply criteria, which predetermine the job
evaluation results (Berrocal et al., 2018; Kilgour, 2008). As will be demonstrated, the

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process requires various decision-making and analytical procedures, and therefore

the quality of the system is highly dependent on the competency of the team.
Typically, the team should include human resources (HR) professionals who are
knowledgeable of compensation systems and job analysis. Moreover, managerial
representation from various business units and functions will add a wider perspec-
tive, customized input, and better acceptability. Utilizing internal and external con-
sultants is also common, and, depending on affordability, capability, and desirabil-
ity, organizations might hire a consulting firm to lead the initiative.
We need to be aware of adding employee and union representatives. In some
countries, unions have the right to be part of the team as it has a direct implication
on pay. Adding employee representatives will increase perspective and acceptabil-
ity. That said, including both will usually result in lengthening the process and add-
ing complexities; thus, limiting their numbers in the task force is desirable (Kilgour,
2008). As practical advice, the more diverse the perspectives, the richer the input;
however, complexity should be limited when possible to ensure team functionality.

Step 02: Select Compensable Factors

The initial task for the task force is to decide on the most important criteria that
result in value to the organization, thus distinguishing factors vital for achieving
organizational objectives. To be measurable for each occupation, the criteria should
be generic, clearly identifiable, and common across jobs. Simply said, the compen-
sable factors are the ones on which the company is willing to reward employees.
Compensable factors are typically limited to four or five (a maximum of seven is
advised), as having less will result in inaccuracy, and having more will result in
excessive complexity. Sub-factors might be added to reflect the complex composite
of each compensable factor. For the committee to decide on the most relevant fac-
tors, members are advised to start by reexamining the job analyses for all or a wide
sample of occupations, in addition to checking the universal and industry-specific
standards. Note that job analyses and job descriptions are required for various HR
functions, so we assume that they exist, but if not, then this should be the second
step in this process.
Organizations have a wide variety of compensable factors to choose from, there-
fore, it is useful to mention some common ones. For example, the U.S. Equal Employ-
ment Opportunity Commission (EEOC) and the International Labour Organization
(ILO) state four generic factors to consider when deciding on fair pay: skill (qualifi-
cations), effort, responsibility, and working conditions (EEOC, 2021; ILO, 2008). Each
of those factors can be composed of several sub-factors. For example, the effort fac-
tor could be composed of physical, mental, and emotional efforts (ILO, 2008). In their
job evaluation method, Korn Ferry (2017) identifies three factors: accountability
(sub-factors: freedom to act, nature of the impact, and magnitude/area of impact),
know-how (sub-factors: practical/technical knowledge, managerial knowledge, and
communication and influencing skills), and problem solving (sub-factors: thinking
environment and thinking challenge). Figure 2 summarizes these factors and sub-
factors. Other compensable factors might include the complexity of tasks, experi-
ence, education, supervision, confidentiality, the risk level of an error committed,
impact on customer experience, autonomy, and so on.

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Skills/Qualifications Responsibility Effort

Work-related knowledge Accountability Physical

– Experience Profitability Mental
– Ability Financial soundness Emotional
– Education Market coverage
– Training Client health and safety Working conditions
Manual dexterity
Physical environment,
Interpersonal skills
including hazards
Psychological environment

Accountability Know-how Problem-solving

Freedom to act Practical/technical Thinking environment

Nature of the impact knowledge
Thinking challenge
Magnitude/area of impact Managerial knowledge
Communication and
influencing skills

Figure 2: Common compensable factors and sub-factors.

Note. Adapted from EEOC (2021), ILO (2008), and Korn Ferry Hay Group (2017).

Step 03: Define Compensable Factors

As you might notice, there are many compensable factors to choose from, and some
might be correlated to each other. Therefore, it is vital to define each precisely, as
the same term might differ in definition from one organization to another. Also, as
much as possible, ensure that each factor is unique and does not overlap with
another when articulating each definition. Identifying sub-factors for each factor
will help in clarifying it and avoiding double measurements. Although not always
possible, assigning a quantifiable measure ahead of time for each factor/sub-factor
will help in the subsequent steps. Examples of quantifiable measures include years
of experience, the number of employees supervised, years of education, and finan-
cial impact.
The skill category serves as a good example to clarify how to decide on the defini-
tion of compensable factors. Based on the Equal Employment Opportunity Commis-
sion, “skill” is the know-how and capacity required to do a particular job, which
could be measured based on factors such as education, experience, ability, and
training (EEOC, 2021). Korn Ferry (2017) defines “skill” as the know-how, inputs, and
capacities needed for an occupant to perform competently. Others might include
specific skills as sub-factors in the definition such as listing communication or spe-
cific mental, physical, and analytical skills. Therefore, for the skill factor, there are
many definitions to devise, and the committee should decide on the best articulation

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for its organization. For this paper, “skill” is defined as the level of education and
experience needed to complete the job tasks proficiently. Notice here that the defini-
tion implies two sub-factors—education and experience—where both are easily
quantifiable and thus measurable factors. Education can be defined as the number
of years of formal education and experience as the number of years of relevant
experience required by an occupant to perform the job proficiently (see Table 1).

Compensable Definition: The level of education and experience

Factor 01: Skill needed to complete the job’s tasks proficiently.

Sub-factor 01: Definition: Years of formal education that are required

Education for an incumbent to perform the job proficiently.

Less than 12 years of formal education is required.

1st degree Equivalent to less than a high school degree.
A minimum of 12 years of formal education is required.
2nd degree Equivalent to a high school degree.
A minimum of 14 years of formal education is required.
3rd degree Equivalent to an associate's degree.
A minimum of 16 years of formal education is required.
4th degree Equivalent to a bachelor's degree.
A minimum of a post-graduate degree is required. Equivalent
5th degree to a master's degree or relevant professional certification.
When applicable, vocation training and degrees count
Notes towards the years of education.

Sub-factor 02: Definition: Years of experience that are required for

Experience an incumbent to perform the job proficiently.

1st degree No previous experience is required.

2nd degree Less than 2 years of relevant experience is required.

2 years or more and less than 4 years of relevant

3rd degree experience is required.
4 years or more and less than 6 years of relevant
4th degree experience is required.

5th degree 6 years or more of relevant experience is required.

Experience in previous jobs from different career paths but

Notes with transferrable skills might be counted towards the years
of experience required.

Table 1: “Skill” scale manual.

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Step 04: Determine Scales and Define the Scale Degrees for the
Compensable Factors
After determining and defining the compensable factors (and their sub-factors), the
task force needs to decide on the scale to measure them. Typically, a five-to-seven-
point scale is used. Higher points scales might be used, but they add to the complex-
ity, time, and effort needed to complete the process. Different points scales for each
factor can be used, although for consistency, this is not a common practice unless
some factors are measured with less or more quantifiable variation than other ones.
The example in Step 5 utilizes the four basic compensable factors, each with two
sub-factors for simplicity, and with a five-point scale to measure each. It discusses
the example of “skill” with its definition, sub-factor definitions, and the five degree
definitions. The scale manual should be constructed for each compensable factor.

Step 05: Assign Weights and Points to Compensable Factors

After finalizing the scale manual for each compensable factor, now the task force
needs to generate the point manual for the compensable factors. First, they need to
decide on the weight assigned for each compensable factor and its sub-factors. For
example, skill is weighted at 35 percent of the total job worth, which includes educa-
tion (15 percent) and experience (20 percent). A maximum of 1,000 points is assigned
as possible job total points. Under the one-to-five point scale, the maximum value is
assigned to the fifth degree for each sub-factor, and points for the first through
fourth degrees are assigned usually at equal intervals. The maximum points for edu-
cation is 150 (15 percent of 1,000) and for experience is 200 (20 percent of 1,000).
Intervals between the consecutive degrees will be 30 points (150 divided by 5): The
first degree is 30 points, the second degree is 60 points, the third degree is 90 points,
the fourth degree is 120 points, and the fifth degree is 150 points. The committee
might decide to have unequal intervals, which is acceptable as long as the fifth
degree maintains the maximum points given to the sub-factor. For example, they
might decide to give the first degree 10 points, the second degree 40 points, the third
degree 70 points, and the fourth degree 120 points, and the fifth degree will main-
tain the maximum value, 150 points. Unequal intervals might be used when the
increase from one degree to the consecutive degree is not equal in its contribution to
the job worth. Table 2 presents a point manual for the four compensable factors
mentioned above and their sub-factors, assuming equal intervals.

Step 06: Assess Jobs Based on the Point Manual

After defining the compensable factors and their sub-factors, and deciding on their
weights and points, the next step is to assess the worth of each job. Depending on
the size of the organization, the task force might decide to assess all jobs (if the
organization is small), or it might assess only benchmark jobs. When the organiza-
tion is large, usually the number of occupations is high, which makes it complex for
the task force to assess all jobs. Therefore, the task force will decide on certain occu-
pations to act as benchmark jobs. After assessing those, the team will place each of
the remaining jobs in the same salary grade as a similar benchmark job.

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Compensable Compensable Weight 1 2 3 4 5

Factor Sub-factor

Education 15% 30 60 90 120 150

Skill
Experience 20% 40 80 120 160 200

Mental 20% 40 80 120 160 200

Effort
Physical 5% 10 20 30 40 50

Responsibility Supervision 15% 30 60 90 120 150

Financial 15% 30 60 90 120 150

Working
Environment 5% 10 20 30 40 50
Conditions
Hazards 5% 10 20 30 40 50

Table 2: Point manual for four compensable factors.

To decide on benchmark jobs, the following criteria are representative of the best
practice. First, the job occupations selected should cover a wide range of job levels.
Second, it is highly preferable to choose jobs that are well recognized and clearly
defined, which makes the assessment process from the committee accurate and rel-
atively less complex. Third, the best benchmark jobs are the ones where the tasks
are clear and stable (i.e., do not frequently and significantly change over time).
Fourth, for later purposes, it is best to choose jobs that are also similar to the ones
available in the labor market, and especially within the major competitors’ occupa-
tions. Finally, the task force is highly encouraged to select jobs that are perceived to
be compensated fairly and competitively. Here, both external and internal percep-
tions of fairness are optimal to account for. Table 3 presents an assessment of fifteen
benchmark jobs from the hotel industry, based on the point manual presented in
Table 2.

Step 07: Draw the Organization’s Wage Line and Consider the Market
Wage Line
After assigning the points for each benchmark job, the task force needs to calculate
the current average salary for each. At this point, it is highly recommended to con-
duct an audit of the compensation offered for the benchmark jobs in the market.
Particularly, the organization should focus on the salaries offered by their direct
competitors within their strategic group. Table 4 provides the benchmark jobs’ total
points and their average salaries in the organization and the relevant market.

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Skill Effort Responsibility Conditions Points

Environment
Supervision
Experience
Education

Financial
Physical

Hazards
Mental

Total
Function Occupation

General Manager 150 200 200 20 150 150 20 20 910

Shift Manager 120 160 200 20 120 120 20 20 780

General
Marketing
Management 120 200 160 20 60 120 20 20 720
Manager

Accounting
120 160 160 10 60 120 10 10 650
Manager

Front Desk
90 160 160 30 120 90 20 20 690
Manager
Front Front Desk
60 120 120 30 90 60 20 20 520
Desk Supervisor
Front Desk
60 40 80 30 30 60 20 20 340
Associate
Housekeeping
Manager 90 160 120 30 150 60 40 30 680

Housekeeping
Supervisor 60 80 80 30 120 60 40 40 510

House- Housekeeping
30 40 40 50 30 30 30 40 290
keeping Associate
Maintenance
60 120 120 30 90 30 40 30 520
Supervisor
Maintenance
60 80 80 40 30 30 40 30 390
Associate
Executive
60 160 160 40 120 90 50 50 730
Chef
Kitchen Sous Chef 60 120 120 50 120 30 50 50 600

Cook 60 40 80 50 30 30 50 50 390

Table 3: Points calculation of 15 benchmark jobs from the hotel industry.

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Organization Market
Occupation Points Wage Wage

General Manager 910 $95,000 $98,000

Shift Manager 780 $80,000 $81,000

Marketing Manager 720 $75,000 $75,000

Accounting Manager 650 $70,000 $68,000

Front Desk Manager 690 $65,000 $64,000

Front Desk Supervisor 520 $45,000 $46,000

Front Desk Associate 340 $32,000 $37,000

Housekeeping Manager 680 $55,000 $57,000

Housekeeping Supervisor 510 $45,000 $46,000

Housekeeping Associate 290 $26,000 $27,000

Maintenance Supervisor 520 $45,000 $44,000

Maintenance Associate 390 $35,000 $38,000

Executive Chef 730 $65,000 $68,000

Sous Chef 600 $55,000 $58,000

Cook 390 $35,000 $33,000

Average $/Point $94.38 $96.33

Table 4: Benchmark jobs’ points, average organization wage, and average market
wage.

Note that after collecting the market data, some jobs in the organization might
appear to be significantly underpaid or overpaid compared to the market. Such
benchmark jobs might be considered for reevaluation. To visualize the trend, it is
useful to generate a scatterplot graph and to draw the regression line of the organi-
zation wage and the market wage, as demonstrated in Figures 2 and 3. At this point,
the organization might consider adjusting the organization wage line relative to the
market wage line. Based on the compensation philosophy and targeted talent qual-
ity, the organization might consider the following options:
1. Keep the organization curve as it is.
2. Match the market curve.
3. Shift the organization curve above the market curve by a certain percentage.
4. Shift the organization curve below the market curve by a certain percentage.

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$100,000
$90,000
$80,000
Organization Wage

$70,000
y = 108.2x - 8035.5
$60,000
R² = 0.9426
$50,000
$40,000
$30,000
$20,000
$10,000
0
0 100 200 300 400 500 600 700 800 900 1000
Points

Figure 3: Organization wage scatter graph and regression line.

$100,000
$90,000
$80,000
$70,000
Market Wage

y = 107.93x - 6741.7
$60,000
R² = 0.9401
$50,000
$40,000
$30,000
$20,000
$10,000
0
0 100 200 300 400 500 600 700 800 900 1000
Points

Figure 4: Market wage scatter graph and regression line.

Step 08: Group Jobs with Comparable Scores into Job Grades
After applying the point manual, the task force decides on the pay grades based on a
predefined point range. Considering the previous example in Table 2, the minimum
number of possible points to assign for a job is 200 and the maximum is 1,000. The
committee might decide to have eight pay grades, where each consists of a range of
100 points. Also, let us assume that the committee decided to keep the current com-
pany wage line to minimize disturbance. Each point on average is equal to $94.38
(see Table 4), and the committee decided to round it up to $95.
Table 5 lists the grades and their point range, minimum wage value, maximum
wage value, and range of wages. The maximum wage value might be increased to
have an overlap of pay between grades, which is a common and good practice. The
overlap helps in postponing the promotion of an employee, while still being able to

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Grade Point Range Min Max Max+10% Range Overlap

1 201–300 $19,095 $28,500 $31,350 $12,255 $2,850

2 301–400 $28,595 $38,000 $41,800 $13,205 $3,800

3 401–500 $38,095 $47,500 $52,250 $14,155 $4,750

4 501–600 $47,595 $57,000 $62,700 $15,105 $5,700

5 601–700 $57,095 $66,500 $73,150 $16,055 $6,650

6 701–800 $66,595 $76,000 $83,600 $17,005 $7,600

7 801–900 $76,095 $85,500 $94,050 $17,955 $8,550

8 901–1000 $85,595 $95,000 $104,500 $18,905 $9,500

Table 5: Pay grades’ wage minimum, maximum, range, and overlap.

increase their wage. Moreover, the overlap will minimize the number of jobs that
might be overpaid based on the newly formulated grades. The overlap is decided to
be an addition of 10 percent to the maximum wage value, and thus the range is now
calculated by subtracting the minimum from the maximum plus 10 percent of the
wage dollar value. The overlap dollar value is calculated by subtracting the maxi-
mum from the maximum plus 10 percent. Both the overlap and maximum plus 10
percent are also included in Table 5.
Figure 5 demonstrates the range of the eight pay grades with their overlap. Note
that organizations might use broadbanding, where the number of pay grades is
decreased and their pay ranges are increased. This allows for more flexibility in
wages, the ability to maintain flatter organizations and minimal promotions, and
for retaining qualified employees within their occupation, especially when they are
distinguished performers. Broadbanding is common in knowledge-intensive organi-
zations, where knowledge work and workers dominate the job occupations. At this
point, the committee will place the non-benchmark jobs in the grades, each in the
same grade where a similar benchmark job is placed.
After placing all jobs in their grades, a few employees might be paid currently
above the maximum of the grade or below the minimum of the grade. If paid below
the grade minimum (referred to as green-circled jobs), the most practical solution is
to apply a salary increase. Other solutions are to keep the salary unchanged, which
is unfavorable, or reevaluate and reclassify the employees’ jobs. If paid above the
maximum (referred to as red-circled jobs), the most practical solution is to freeze
the salary until it catches up and fits within the range of the grade. Other solutions
are to reduce the salary, which is unfavorable, promote the employees, or reevalu-
ate and reclassify the employees’ jobs.

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Business Job Evaluation

$110,000
$100,000 Grade
8
$90,000 Grade
7
$80,000 Grade
6
$70,000 Grade
5
$60,000
Grade
$50,000 4
Grade
3
$40,000 Grade
2
$30,000
Grade
$20,000 1

$10,000
0
0 100 200 300 400 500 600 700 800 900 1000 1000

Figure 5: Organization wage grades.

Point Method Strengths and Limitations

The point method’s major strength is its limited subjectivity in comparison to other
methods that focus on internal equity. It is also considered comprehensive, system-
atic, and well detailed, resulting in higher acceptability among employees. It is
highly recommended to publish the point manual to increase transparency and
acceptability. Due to the selection of compensable factors that are common across
jobs, it can be used for many jobs and even applied to newly created jobs. When it
comes to the point manual, it needs to be updated less frequently than salary values,
thus saving time when major salary changes are needed.
That said, the method is complex and comparatively requires more time and
effort than other methods. Its complexity also might not be well understood by some
employees. When it comes to measuring compensable factors, it is not always possi-
ble to depend on quantifiable measurements, which might increase reliance on
human judgment, resulting in various measurement errors and biases. Although
the method sounds objective and scientific, it is useful to remember that it still
requires many discretionary decisions in the process, so its quality is highly depen-
dent on the quality, effectiveness, and goodwill of the task force (Kilgour, 2008;
Koziol and Mikos, 2020).

Final Thoughts and Conclusion

Although introduced in the early twentieth century, the point method is still widely
used due to its effectiveness, with some updates. Depending on the organizational
complexity, the method could be applied once to all jobs or each family of jobs

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within an organization. Job families are occupations with interrelated tasks, share
common knowledge and skills, and usually fit within the same function. Thus, com-
paring jobs within the same family is easier and more accurate than comparing jobs
that are weakly related and significantly different in requirements. It is also vital to
revisit the method when job analyses and descriptions are changed, which is more
frequent nowadays due to job restructuring and technological changes. When it
comes to utilizing the point manual to assess the worth of jobs, this can be done by
secondary task forces. If this is the case, then they need to be trained on how to use
the point manual to achieve consistent results.

Bibliography
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 About the Author

Hadi is the director of the online Master’s in Human Resource Management (MHRM) and a
professor of human resource management at the School of Management and Labor Rela-
tions, Rutgers University. He received his PhD from the University of Leeds, MBA from the
Lebanese American University, and BBA from the American University of Beirut. Hadi’s

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interests are in strategic HRM, knowledge management, artificial intelligence in HRM, and
online education. Hadi teaches courses in strategic HRM, staffing, global HRM, and organi-
zational behavior, both in person and online. He has delivered several professional train-
ing programs, presented at various conferences, and has been a keynote speaker at various
professional events.

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