The five competitive advantages of job grading

Many organisations choose to group jobs into grades or bands to help manage pay and reward decisions. Scoring jobs based on their complexity and the skills required, job evaluation systems offer an effective way of ranking the numerous jobs employed across an organisation, creating a framework that highlights broadly equivalent roles.

We outline the five key benefits of introducing this kind of framework.

1. Financial certainty

From a Chief Finance Officer’s perspective, job grading can help to better manage payroll costs. The process is essential in setting the right budgets, providing the Finance team in particular with greater certainty over the required HR budget for the year.

An equitable pay and grading structure can be developed organisation-wide, creating a more accurate picture of pay to assist with planning year on year. So if you are wondering what is a job grading system, one of its primary uses is to ensure that employees feel as though they receive fair remuneration in line with their job role and responsibility.

2. Retain valued employees

Job grading can have a positive impact on talent retention in two ways. Firstly, engaging all relevant stakeholders, to determine the guiding principles for the structure’s design and operation. This secures buy-in from the outset and ensures employees feel fairly listened to and understand the logic and process that defines their level of pay and benefits. Secondly, transparency and fairness prevail; this structured approach offers a clear line of sight for employees in terms of career development and by communicating the fact that the system offers parity of pay, employees can have confidence that they are being fairly remunerated. This dual approach helps to drive down the cost of employee turnover, in turn keeping operational costs down. The cost to organisations of replenishing talent you have already trained can equate to hundreds of thousands of pounds, demonstrating the fact that reward is a business investment, as opposed to a cost.

Established parameters guide decision-making, ensuring employees and managers know and understand the basis upon which pay decisions are made. A system of grades minimises subjectivity, enabling rational and consistent decisions to be made on a transparent basis. The greater the scrutiny around each role when setting each grade will ensure that the grades are as accurate as possible, improving employee satisfaction with the process.

3. Attract talent

Job grading can also enhance your employee value proposition. A solid framework can inform decisions around each individual and promote the organisation’s position as a responsible and ethical employer. By showing candidates that the organisation is committed to fair and equal opportunities, this upholds the employer’s promise to its prospective and current employees. Candidates increasingly say that a lack of diversity impacts their choice of employer, so being transparent about the objective HR practices that are in place within your organisation can be a factor in candidates choosing to apply.

As two-thirds of respondents to our UK Reward Management Survey highlighted ongoing recruitment difficulties, paying fairly in the market is an appealing proposition. Employees are increasingly looking for transparent employers who promote talent recognition as much as diversity and inclusion. By internally and externally communicating a good internal framework of pay grades, this objective approach can strengthen the trust candidates place in you and be the critical factor that makes them choose you over a competitor organisation in the war for talent.

4. Demonstrate vision

Rationalising roles into a system of grades and job families can also bolster the use of cutting-edge technology. Organisations are equipped with the framework to be able to harness HR analytics more powerfully for the wider business’ benefit. A system of job grading may also enable organisations to identify where artificial intelligence more easily could complement each job role, driving productivity in the workplace. Utilising job grading as part of a greater push to harness the opportunities of technology demonstrates the progressive nature of the organisation, driving forward its IT capabilities and supporting the organisation’s wider vision that is built for the future.

On an individual employee level, in a career family structure, each role has a development path mapped out. These are usually defined by profiles that describe the knowledge, skills and experience required for each grade. The framework provides an important reference tool for career development and succession planning decisions to be made, identifying early on where certain roles need to be recruited for and where key individuals are making the case for promotion. This also equips employees with the information they need to see to understand what is required of them to reach the next level. They can use the framework to understand the impact of their role, know how their role fits in with delivering the wider vision of the firm and feel more valued for their contribution.

5. Achieve compliance

At Paydata we focus on analytical job evaluation, which provides a granular framework for organisations and importantly provides a robust defence against equal pay claims. The Equal Pay Provisions of the Equality Act 2010 ensures that men and women in the same employment performing equal work receive equal pay and our approach ensures that equal pay can be assessed across:

• Like work – people doing the same or broadly similar jobs.
• Work rated as equivalent – where a job evaluation scheme operates and jobs are graded equally.
• Work of equal value – comparing jobs where no job evaluation scheme is in place.

Some employment tribunals have considered the question, ‘what is equal?’ and the answer really lies in the application of fair analytical job evaluation that underpins the grades and job families that exist. Therefore an objective job-grading framework is the most reliable way of assessing which jobs are of equal value and should be classed in the same grade.

Solutions that suit you

The grading approach that each organisation adopts will be tailored and specific to suit their culture. It is important to involve the whole organisation where possible, actively listening to employees, recruitment, learning and development and line managers to secure their input and achieve buy-in to implement a successful framework. Read more about how we helped Nuffield Health to develop an updated pay structure to bolster their recruitment and retention.

Get in touch to discuss how job grades and bands can support your pay and benefits decisions.