Factor comparison

What is factor comparison?

Factor comparison is a job evaluation method that HR teams use to compare and rank jobs based on skills, responsibility, effort, and working conditions. Compensation is based on these factors, rather than on job title alone.

What are the advantages of using factor comparison?

Here are some benefits that make factor comparison ideal for job evaluation:

Creates competitive and consistent salary structures by assigning specific monetary value to each factor
Makes a job evaluation objective by breaking down every job into its core components
Applies to almost every role, irrespective of its seniority or skills required
Ensures every employee is compensated fairly for their work
Helps assign a fair salary for new roles
Improves pay transparency, as it has clear reasons for one particular job title being paid more than another

What are the disadvantages of using factor comparison?

Here are some cons that come with adopting the factor comparison method:

Makes job evaluation time-consuming due to multiple steps, from selecting the compensable factors to building a salary structure
Requires experts to perform job analysis, analyze market salary data, and decide compensation
Involves careful judgment when assigning monetary value to each factor
Needs to be updated regularly with industry changes, new responsibilities, role expansion, and more

What are some elements taken into account for factor comparison?

Factors commonly used in factor comparison job evaluations include:

Skills refer to the level of knowledge and expertise required to excel in the job.
Mental efforts refer to the level of concentration, analysis, and decision-making required to excel in a job.
Physical efforts are the amount of strength required to perform the job.
Responsibilities refer to the various tasks that an employee is responsible for at work.
Working conditions refer to the environment in which the employee is expected to perform the work.

How does the factor comparison method work?

Here's a step-by-step explanation of how factor comparison works in practice:

Step 1: Choose benchmark jobs

As a first step, choose job titles in your organization that are common, have clearly defined responsibilities, and offer stable pay. You can use these jobs as a reference for the entire job evaluation process and compare other job titles with them. This helps you evaluate all roles consistently and fairly.

Step 2: Select compensable factors

In the next step, select the compensable factors such as skill, responsibility, effort, and working conditions that you will use to evaluate the roles. Use the same factors for every job to reduce bias and ensure the evaluation is done in a structured manner.

Step 3: Divide benchmark job salaries into factors

After identifying the factors, allocate potions of each benchmark job's salary to the selected factors. This helps you determine how much each factor is worth in monetary terms for each role.

Step 4: Compare other jobs with benchmark jobs

Once you assign monetary values to the factors, compare other jobs with the benchmark jobs you selected in the first step. In this step, you evaluate which job requires more skill, which requires less effort, which involves greater responsibility, and which has more demanding working conditions.

Step 5: Calculate the salary

Finally, add together the monetary values assigned to each factor to calculate the total salary for each job. This ensures that employees are paid based on the actual demands of the job rather than based on bias or job title alone.

What is the difference between factor comparison and the point rating method?

While the factor comparison method assigns monetary values to different selected compensable factors directly, the point rating method assigns points to the chosen factors and converts those points to monetary value.

When should organizations use the factor comparison method?

Organizations can make use of the factor comparison method when they're trying to:

Create a fair and equitable salary structure.
Build new jobs and roles.
Establish pay transparency and fix pay inequality issues.
Group job titles into different levels.