Designing Compensation Systems and Employee Benefits - Research Paper Example

Therefore, job evaluation attempts to document the shared and general characteristics of a job. Hence, in a job of driving a car, job evaluation would be attempting to determine the proficiency of the driver in driving the car or how well the person is aware of the roads. Job evaluation thus determines how well a person is handling each of the constituent tasks of the job. Employees receive compensation from companies for their work, however there’s a difference between compensation and pay.

Compensation basically includes all types of financial rewards and tangible services which the company provides to the employees. For making the compensation internally consistent, the employees must be convinced that the jobs are being paid for by the employer according to its worth. There are certain jobs within the company which have more scope for contributing to the overall welfare of the company than other jobs. Hence such jobs are the ones which receive a higher pay. For example, in a hospital, the nurses are the ones who contribute greatly to the care of patients; hence the nurses are paid more than the orderlies.

Determining the value of each and every job in an organization is very important since it assists in making the pay rates of an organization internally consistent. This value determination of jobs is called job evaluation. Some criteria used for job evaluation include the effort required to perform a job and the difficulty of a particular job. Compensations should also be developed which are market competitive. If for example the pay is low compared to the market, the company would encounter turnover and recruitment problems.

If the pay is higher than the market, the company would potentially experience problems with the budget which may result in layoffs. The companies which pay above the market are termed as market leaders while the companies paying below the market rates are