What is the point factor method?

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Point Factor Method

The point factor method is a commonly used job evaluation technique that assesses the
value of different positions within an organization. It involves assigning pre-defined factors
relevant to each role, such as skills, responsibilities, effort, and working conditions.

Each factor is then further divided into different levels or degrees of complexity (e.g.,
“basic computer skills” vs. “advanced computer skills” for the “skills” factor). The different
factors are weighted according to their importance to the organization. For example,
“experience” might be weighted more than “travel requirements.”

Jobs are evaluated based on the points assigned to each level within a factor. The total
points for each job are used to determine its overall worth and placement within the
organization’s pay structure.

How does the point factor method work?

The point factor method typically involves the following steps:

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 1. List of jobs: Identify and list the specific jobs that need to be included in the point
factor system. To be more effective, you can choose jobs within the same job family
or department or other job types that need a clear hierarchy and compensation
structure.
2. Identify key factors: First, conduct a job analysis todetermine which factors are
relevant to evaluating each job. Common factors include skills (e.g.,
communication), effort (e.g., mental and physical demands), responsibilities (e.g.,
supervisory role), and working conditions (e.g., travel requirements).
3. Determine the scoring levels or degrees: For each factor, define the levels
representing increasing complexity or responsibility. For example, the “education”
factor might have levels like “high school diploma” (10 points), “bachelor’s degree”
(20 points), or “advanced degrees” (30 points).
4. Assign a weight to each factor: Not all factors will have equal importance to the
role and the organization, so you will need to assign weights. “Supervisory”
responsibilities might have a higher weight than “basic office skills.”
5. Evaluate each job: Use the pre-defined factors and their corresponding levels to
evaluate each job in the list. The evaluator determines which degree best describes
each factor of the position. For example, a job requiring advanced skills might be
rated at the highest degree for the skill factor.
6. Calculate total points: Add all the points assigned to each level to get the final
score for each job. This score is used to compare the job to others in the
organization.
7. Define or adjust the pay structure: After determining the total point score for each
job, you must establish salary ranges that correspond to these points. This process
might involve creating a new pay structure to match the point score ranges or
adjusting your existing one to better reflect each job’s relative worth (determined by
the points).

Advantages and disadvantages of using the point factor method

Here are some benefits and cons to consider when using the point factor method:

Advantages

Objectivity: By quantifying the value of a job based on various factors, this method
minimizes subjectivity and personal bias, promoting fairness in compensation.
Transparency: The clear criteria and systematic approach make it easier to explain
how job values were determined, thus increasing transparency with employees
Detailed analysis: The method provides a detailed analysis of job roles, which can
be beneficial not just for compensation planning but also for identifying training
needs, career progression pathways, and recruitment strategies.
Facilitates pay equity: By providing a structured approach to evaluate the worth of
a job based on its duties and responsibilities, the point factor method helps ensure
that pay levels are equitable and aligned with the job’s demands.

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Disadvantages

Time-consuming: The process of defining factors, assigning weights, and

evaluating each job can be complex and time-consuming. It requires a significant
investment of resources and expertise to implement and maintain accurately.
Subjectivity in weighting and scoring: Despite being a quantifiable method,
there’s an inherent subjectivity when it comes to assigning weights to various
factors. This can introduce biases and potentially skew the evaluation of a job’s
value.
Rigidity: While designed to be flexible, the method can become rigid over time if
not regularly reviewed and updated. This rigidity may make it difficult for
organizations to adapt quickly to changes in job roles or market conditions.
Limited scope: The focus on quantifiable methods may not fully capture other
qualities such as creativity, problem-solving, or emotional intelligence, which may be
just as critical for certain positions.
Cost: The detailed nature of the point factor method can make it costly. The initial
setup, ongoing maintenance, and the need for trained specialists to perform job
evaluations contribute to higher operational costs.

HR tip

Before starting with the point factor method in your organization, involve key
stakeholders like managers and subject matter experts. They can help you choose
the most relevant factors and their associated weights to ensure they accurately
reflect your organization’s needs.

Conducting job evaluation using the point factor method

Here is a step-by-step guide to help you perform job evaluations using the point factor
method. For simplification, we have limited the subcategories included in each factor.

Step 1. Factor identification & degree definition

Identify critical factors that determine the value of different jobs within the organization.
Define degrees for each factor to standardize evaluation:

Skill: 40% of total value

Basic: High school diploma or equivalent, basic office skills (10 point)
Intermediate: Some college or specialized training, higher technical skills (20
points)
Advanced: University degree or extensive specialized training, high-level
skills, and expertise (30 points)

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 Responsibility (low, medium, high): 30% of total value
Low: Follows basic procedures, has limited decision-making responsibility (10
points)
Medium: Works independently, has some decision-making authority (20
points)
High: Handles complex projects; makes critical decisions (30 points)
Effort: 20% of total value
Low: Minimal physical or mental exertion involved (10 points)
Medium: Concentration needed or some physical effort (20 points)
High: Intensive mental focus or significant physical exertion (30 points)
Working conditions: 10% of total value
Standard: Comfortable environment, minimal risks (10 points)
Challenging: Some discomfort or occasional risks (20 points)
Harsh: Regular exposure to discomfort or hazards (30 points)

Step 2: Assign points and weight to each degree

Assign points based on the job’s requirements and calculate the weighted points for each
factor. Example for a Customer Service Representative:

Assign points

Skill: Intermediate (20 points)

Responsibility: Medium (20 points)
Effort: Medium (20 points)
Working conditions: Standard (10 points)
Total points (unweighted): 20 + 20 + 20 + 10 = 70 points

Weighted points

Skill: 20 × 0.40 = 8
Responsibility: 20 × 0.30 = 6
Effort: 20 × 0.20 = 4
Working conditions: 10 × 0.10 = 1

Step 3: Point calculation

Sum the weighted points to determine the job’s overall point value:

Total weighted points: 8 + 6 + 4 + 1 = 19

Step 4: Job ranking

After you have the total weighted points for each job, you can rank the jobs based on their
overall point values. The higher the points, the more ‘worth’ the jobs have within the
organization.

Step 5: Review and validate results

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Share the job evaluation results with key stakeholders for validation. Make any necessary
changes based on feedback.

Step 6: Pay structure implementation

Use the job evaluation results to develop or update a pay structure that aligns with market
trends and organizational objectives. Regularly review and update it to ensure it matches
market standards.

For a more detailed overview of this process, check out our template on the Point Factor
Job Evaluation.

Preview of our point factor method template in Excel.

What is the difference between the point factor method and the
factor comparison method?
Both methods use a quantitative approach, but the main difference is how they assign
value to jobs. The point factor method assigns pre-defined points to different levels
within each factor. In contrast, the factor comparison method uses pre-selected
benchmark jobs (e.g., existing positions in the organization) to rank other positions based
on each factor. Here’s an overview of their key differences.

Point factor method

Factor comparison method

Evaluation process

Each job is divided into specific factors with pre-assigned point values.

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Jobs are ranked against pre-selected benchmark jobs for each factor. There are no pre-
assigned points.

Factor definition

Factors are divided into levels with assigned points.

Factors are used for comparison between jobs.

Factor weighting

Each factor is assigned a point value based on its importance to the job.

Factors are not explicitly weighted, but their importance is considered when ranking jobs
against benchmarks.

Job evaluation

Jobs are assigned points based on how well they meet each factor.

Jobs are ranked against each other for each factor.

Complexity

Assigning point values makes it more complex to set up.

Less complex to set up but requires identifying and maintaining a set of benchmark jobs.

Salary implications

Points are used to determine salary ranges.

The salary range is based on market data for benchmark jobs.

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