The Point Method of Calculating
Making a new hire is a difficult process of sorting through applicants' skills and knowledge. Even more difficult is deciding how much a job is worth based upon these same attributes. A few methods are available that can better help human resources personnel and managers determine how much compensation a person should receive if he accepts a job. One possibility is the point method of calculating.
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Compensable Factors
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Determine attributes pertinent to a job in the firm and the reasons a company pays for a person to hold that position. These factors are general factors related to employment, but may not be the same for every company. Such factors may include: experience, knowledge, education, safety-oriented, communication, creativity, decision making, responsibility, working conditions, accountability and physical or mental demands.
Degrees
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After determining the factors pertaining to employment, you must then determine the varying degrees to base compensation on. The first degree would be the lowest level, with the job only requiring this attribute or skill minimally. Most companies extend the level of degrees up to the fifth or sixth degree. A job with this degree requires an immense amount of a certain skill or attribute. Assign points based upon the degree level, where a job that requires a higher degree would receive a greater amount of points. For example, in first-degree experience a job receives 20 points, in second-degree experience it receives 35 points, in third-degree experience it receives 60 points, continuing until all of the degrees are assigned a numerical value.
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Evaluate Job
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Evaluate each job to determine the compensation factors it requires and to what degree. Usually a human resources manager, or other member of the management team, performs this evaluation. Add up all of the points based upon your determinations. The sum of these points will help you to set a pay scale for each position.
Review Industry Benchmarks
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Examine similar jobs in the industry and how much competing firms are paying for these positions. You can find relevant pay information at the Bureau of Labor Statistics. Benchmark data can help you to set minimum and maximum pay amounts and aid you in setting applicable dollar values to the point system. If a job in your industry and region possessing 700 points pays employees between $45,000 and $55,000, you know that a similar position within your firm should probably compensate at the same level.
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