What are the differences between job content evaluation and direct market pricing?

Job content evaluation. Employers that use a form of job content evaluation compare the content of jobs to determine their worth relative to each other. Once a relative job worth hierarchy has been established, a few benchmark jobs are selected and salary data is collected for them. The salaries of the rest of the jobs are interpolated from the market data obtained for the benchmarks.

There are many different types of job content evaluation. Some are based on complex quantitative analysis. Some are based on methods of analysis that are very unsophisticated. The basics types are outlined at What are the basic types of job content evaluation? at ¶31,540 .

Direct market pricing. In both direct market pricing and job content evaluation, it is necessary to find out what other organizations are paying for specific jobs. But an organization using direct market pricing must do this to a much greater degree than an organization using any of the job content evaluation techniques.

An organization utilizing direct market pricing needs to determine the going market rate for somewhere between 50 and 90 percent of its jobs. This is done either by conducting a salary survey or using existing salary survey data.

Which technique is right for your organization? This question can be difficult to answer -perhaps too difficult to answer without input from outside consultants. But here are some things that organizations should take into consideration when trying to decide which job evaluation technique is right for them:

• management philosophy (does management feel that it owes it to the stockholders not to pay a dime more for wages and salaries than the going market rate?);

• internal and external equity (generally speaking, direct market pricing is the most sensitive to the considerations of external equity, while the various techniques of job content evaluation are more sensitive to internal equity considerations);

• workforce composition (the more different types of jobs to be evaluated, the more likely that either direct market pricing or one of the more sophisticated types of job content evaluation is the way to go);

• expense (the more complex the job evaluation technique, the more expensive it is to maintain the pay program); and

• consultants (since many consulting firms are proponents of only one or a few of the specific techniques, it's a good idea to talk to more than one consultant before a final decision is made).