Set Up Job Grades

It is important to be careful when setting up job grades. If you’re not careful, or perhaps more to the point informed, you can end up with a mess that does more harm  than good.

Rate Range image from BLR.

Rate Range image from BLR.

You could create a job grade structure that is solely based on internal data but, to ensure competitiveness within your job market, you need to utilize market rates as well.

There are lots of places where you can find salary data. For example, Ive worked with data from both Mercer and Towers Watson (formerly Watson Wyatt). I’ve worked with salary data from the local Chamber of Commerce and industry surveys conducted by trade groups. Of course, there’s my personal favorite—Salary Finder at Compensation.BLR.com—and there are other online resources for salary data as well.

I recommend using market data from at least three salary surveys to get a more accurate view of the market and reduce the chance of working with data anomalies.

The structure

Job_Grade_ElementsYou could decide to have 2 job grade families (exempt and nonexempt) and 10 grades within each family. Or, you could need a structure that is entirely different. Before you can build the structure for your job grades, you need to make a few decisions:

  • How many  job grade families are needed?
  • How many grades are needed within each job grade family?
  • How should the job grades be identified? Numbers? Letters? Labels?
  • What should be the midpoint of the lowest grade for each job grade family?
  • What should be the range spread for the job grades for each job grade family?
  • What should be the difference in mid-points of the grades within each job grade family?

Job_Grade_TableOnce you make these determinations, you can create the job grade structure for each job grade family using spreadsheet software such as Excel. Compensation.BLR.com provides a calculator that is easy to use and makes setting up job grades a snap. (Yep, it’s a plug for my day job.)

The jobs

Once the job grade structure is created, you’ll need to place your organization’s positions within the structure. One of the simplest methods for this task is to research market data for the benchmark positions in your organization and place each of them in the grade with the mid-point that is closest to the mid-point of the market data.

Before you do that, however, you’ll need to organize your jobs into the job families you’ve already identified as being needed then you’ll rank the jobs within each job family. Because you’ve ranked the jobs, once the benchmark jobs have been added to the structure, it’s fairly simple to add the non-benchmark jobs based on their rank compared to the benchmark jobs.

Is it worth it?

It’s a pretty simple process to create a job grade structure. After all, it’s only a few formulas in a spreadsheet. But, researching market data and appropriately placing jobs within the structure can be a real time-eater. It can also be somewhat frustrating, especially when you can’t readily find data for enough of the jobs in your organization to be comfortable with slotting in the remainder of the them.

Another issue can be that the structure you created places jobs that should be at different levels based on their rank into the same grade. If that happens, you may need to rethink the mid-point differential of the grades.

If you’re uncertain about tackling the job grade creation process, lot’s of help is available. For example, you could take a class via WorldatWork, hire a consultant or sign up for a webinar that walks you through the process.

Check this blog’s home page for a list of upcoming webinars.

 

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