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The Basis for Determining a Good Compensation Package

written by: N Nayab•edited by: Jean Scheid•updated: 5/30/2011

A job analysis records specific tasks and characteristics of the job, and the skills and competencies required to undertake such tasks. The major uses of this type of analysis are for compensation plans, training need analysis, reviewing performance, lending role clarity and attracting talent.

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    Defining the Tool

    Job Analysis A job analysis is the process of gathering and analyzing information about the content and requirements of job, and the context in which jobs are performed. It encompasses the following:

    • Job description or the job summary, specific tasks, duties and responsibilities of the position.
    • Job specification or the knowledge, skills, competencies, and qualifications required to perform the tasks specified in the job description.
    • Job context, or the relative worth and position of the job.
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    The Worth of a Job

    One major use of job analysis is to determine wages and benefits. Traditional methods assign value to each component of a job. An analysis determines the specific components or tasks in a job, with time and motion studies determining the time required to complete a specific task or component.

    Modern methods of wage determination have moved beyond such methods, but the role of job analysis in compensation still retains its relevance. This type of analysis is still the tool to determine the compensable job factors in a job, such as unique skills or qualifications, and the nature of the work environment, such as prevalence of hazardous conditions or risky conditions that may require attractive pay and a special set of benefits to retain talent.

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    Placement

    A job analysis determines the placement of each job in clusters or families, and is also relative to each other, depending on the duties, qualifications, and competencies defined for the job. Jobs within a cluster of family have common vocations or professions, and within the cluster, the jobs vary. Each zone varies on the level of complexity, scope of responsibility, and pay. Such placement:

    • Provides a clear cut path of job progression for career advancement and increasing compensation.
    • Helps determine exempt and non-exempt employees, and distinguishes between managerial and non-managerial status of jobs. Such a classification determines the applicability of the Fair Labor Standards Act (FLSA) on the job, and affects compensation directly. FLSA covers employees eligible for overtime.
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    Benchmarking

    One major use of a work analysis is to prepare job descriptions, or a broad list of tasks and responsibilities connected with the job. Such job descriptions help benchmark the job with other jobs within the company and in the industry, and such benchmarking allows determination of what competitors, or even the company itself pays for similar jobs. In a similar way, an analysis provides job specifications or the skills, qualifications, and competencies required to perform the job. Benchmark within the company and with other companies the industry on the pay levels for similar skill sets and qualifications. Such benchmarking helps companies determine market pay for jobs and positions, and allows them to match or exceed the same in a bid to retain talent and keep employees satisfied.

    Do not, however, determine compensation solely by benchmarking job descriptions. Consider geographical factors such as variations in cost of living, skill-set and experience of candidates under different wage levels, the nature of business, and size of the company as possible distorters when benchmarking.

    Employee satisfaction directly correlates with pay, and perceived equity in pay. A good analysis is the basis to determining the worth of a job, and designing a just and equitable compensation package for the job. In the contemporary knowledge economy where human resources is a key source of competitive advantage, effective compensation systems determine the ability of firms to attract talent, and an effective analysis remains the major tool toward this purpose.

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    References

    • University of Nebraska-Lincoln. “Job Analysis." http://hr.unl.edu/compensation/nuvalues/jobanalysis.shtml
    • Worldatwork. “A Data Driven Approach to Job Analysis and Market-based Job Evaluation." http://www.worldatwork.org/waw/adimLink?id=42072. Retrieved May 29, 2011.

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