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The Importance of Job Grading

Job grading is an essential part of designing a company’s organisational and remuneration structures. It involves creating different job levels that help companies develop job-specific duties and decide on payment strategies per job level.

Learning how job grading works and the various job grading options available, can help you understand how to design an organisational structure and implement remuneration policies that allow a company to function efficiently and equitably.

In this article, we answer the question: “What is job grading?”, explain the purpose and benefits thereof and describe how and when it should be done.

What is job grading?

Job grading is a systematic process to determine the relative value of each position in an organisational structure in relation to other positions within the same structure.  It is important to note that positions are graded and not job incumbents.  Job grading should therefore not be confused with the performance / merit evaluation of individual employees and should not take into consideration the years of experience the incumbent might have.

Job grading instruments evaluate the degree of complexity of a particular position’s job content as well as the knowledge, skills and other social and physical attributes required to perform the set tasks and deliver the agreed outcomes. This is done without any reference to the characteristics and performance of people currently occupying these positions. The only objective of this process is to establish a logical hierarchy of positions within the organisational structure.

What is the purpose of job grading?

The goal of this process is firstly, to place all the positions in a logical hierarchical ranking of relative value or importance as mentioned above. By grading positions with reliable and objective instruments, positions in a particular structure can also be compared with similar positions in other organisations.

Job grading further provides employers with the opportunity to compare the remuneration they offer to employees, with the remuneration offered by other employers for similar job grades. Statistics for different positions (professions), industries and regions can be obtained as a basis for comparison.

Job gradings and market statistics enable employers to develop unique salary scales and benefit structures with the objective of providing market-related and fair remuneration (ensuring both internal and external pay parity).

Why should the positions in my company be graded & what are the benefits thereof?

1.  Ensures equality
As mentioned above, ensuring that equivalent jobs are rewarded equally is a key function of job grading. This system enables companies to comply with regulations that are in place to prevent discrimination (as determined by the Employment Equity Act no 55 of 1998) and establish an equitable workplace.

2.  Helps retain valued employees
Even though financial reward is not necessarily a primary motivation for working at an organisation, paying your employees what they are worth is still one of the best ways to ensure that they remain in your employ.

3.  Attracts new talent
A pay structure that is unequal or out of step with the wider job market, will make it very hard to attract top talent to your business. Conversely, having an equitable and consistent job grading system in place makes working at your organisation a wise and advantageous choice for top recruits.

4.  Financial certainty
A formalised and transparent remuneration policy makes it easier to set budgets and manage ongoing payroll costs.

How & when should job grading be done?

Using subjective “managerial discretion” to determine pay awards is an outdated practice that typically upsets more people than makes them happy. Therefore, employing a systematic, transparent, and objective method of job evaluation is advantageous for employers and workers alike.

Most (if not all) job grading systems are open to a certain degree of error, largely because most jobs encompass intangible aspects that are hard to quantify. However, both peer review and panel assessment address this issue as group decision-making is often more objective based on the fact that it eliminates, or at least dilutes, individual bias.

Furthermore, the continual review and re-evaluation of your organisation’s pay framework ensures that it remains up-to-date and minimises the impact of errors and inconsistencies, especially as jobs inevitably evolve over time.

To avoid these pitfalls, Joubert & Associates can assist companies to accurately evaluate and grade positions, whilst eliminating as much personal bias from the process as possible.

Article written by Phyline Duncan,it%20difficult%20to%20compare%20positions.


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