A Guide to Job Evaluation, Grade Structures and Salary Scales

1. Introduction: Pay Between Cost Pressure and Talent Attrition

HR departments face a continuous twofold challenge:

• Internal pressure: controlling the payroll and operating expenses.
• External pressure: intensifying competition for talent and rising staff turnover driven by competitors' offers.

Gaps arise when there are no methodical criteria, so salary is set by the candidate's negotiating skill or previous salary, and structural distortions accumulate: a new employee earning more than a longer-serving, more competent colleague, or jobs of equivalent impact paid differently without justification.

The basic rule of the solution: Evaluate the Job, not the Person.

2. Job Evaluation Using the Point-Factor Method

The point-factor method is one of the most widely used job evaluation methods: a job is evaluated by breaking it down into measurable compensable factors (Compensable Factors), the most prominent of which are:

• 1Knowledge, skills and experience:
  The depth of specialist knowledge, the years of experience required, and the level of education and professional certifications.
• 2Problem solving and complexity:
  The nature of the challenges the job faces, the level of innovation required, and the availability of guidelines and policies.
• 3Impact and accountability (Impact & Accountability):
  The size of the budgets managed, the risks arising from the jobholder's decisions, and their impact on the organization's revenue and operations.
• 4Scope of supervision and communication:
  The level of leadership, the nature of internal and external relationships, and the ability to negotiate and influence.

Each job receives weighted points reflecting its relative worth, so jobs are ranked and grouped into homogeneous Job Grades.

3. Building the Grade Structure and Salary Scales

The salary range for each grade consists of three core elements:

• Midpoint: The target pay for a fully competent employee who performs the job independently, usually calibrated against the Market Median (P50) from the market data the organization adopts.
• Minimum: The pay for an employee who meets the minimum job requirements and needs a period of development.
• Maximum: The most the organization pays for this job, however competent and long-serving the jobholder.
• Range spread (Spread): The relative difference between the maximum and the minimum, typically between 30% and 50% in operational jobs, and reaching 50%–80% in leadership and executive jobs.

4. The Compa-Ratio and the Annual Merit Matrix

The compa-ratio is a control indicator that measures where an employee's actual salary sits relative to the midpoint of their grade:

Compa-ratio = (Employee's actual salary ÷ Midpoint of their grade) × 100

The reading thresholds vary with the grade's range spread. Illustrative example: in a grade with a 50% range spread, the minimum sits at about 80% of the midpoint and the maximum at about 120%. On this example:

• Below 80% (below the minimum): the salary is below the grade range; a case that calls for correction to avoid losing the employee.
• 80% to 95%: an employee at the start of their path within the grade, or still building experience.
• 95% to 105% (around the midpoint): a balanced position; the employee is paid the fair value of the job.
• 105% to 120%: an employee with outstanding performance and long experience in the grade.
• Above 120% (above the maximum / Red-Circled): the salary has exceeded the grade ceiling; the reward is usually better directed to variable performance incentives rather than an increase in base salary.

In grades with a narrower or wider spread these thresholds change, so the compa-ratio is always read against the limits of the grade itself.

The Annual Merit Matrix (Merit Matrix):

The annual increase percentage is tied to two factors together: the performance appraisal result and the current compa-ratio, so the largest percentage goes to the high performer with a low compa-ratio, and distortions shrink gradually over the years.

5. How NudhumOS Supports Pay Governance

• Access limited to authorized users:
  Job evaluations and factor points are carried out within the platform, and pay data is visible only to authorized users.
• The cost of correction before the decision:
  The platform shows the cases that fall outside their grade range, and the cost of correcting each case, before a decision is made.
• CEO approval:
  The grade structure and salary scale are approved only through a formal approval path that ends with the CEO.
• Comparison with the market data the organization adopts:
  The platform supports comparing midpoints with the market data the organization selects and adopts.