NRC: Job grades, job evaluation, and Jobscore.
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Page 16


2.0 Paying for Performance.

Implicit in a grade structure where there is a range of salaries associated with each grade, is the assumption that employees will move through the grade based on gaining additional competence. In simple jobs, this additional competence is frequently assumed to be based on length of service. But even here, research shows a limit to the increase in the level of contribution that can be made solely through additional time in the job. Such research shows that after seven years in a job performance has plateaued. If movement through a salary range is to be based on measures more objective than time in the job, then a performance appraisal system needs to be implemented. The subject of this paper is not performance appraisal systems, but it is necessary to introduce the topic briefly because it plays an important role in the sections to follow.


2.1 Performance Bands and Compa-Ratio.

To regulate salary progression through a grade, the grade salary range (band width), minimum to maximum, is divided into sub-bands, or zones. Each zone represents a level of competence in performance of the job. To determine the zone into which an individual's salary falls, an objective, quantitatively defined, performance appraisal system should be used. As difficult and controversial as it may be to implement and use such a system, alternative subjective systems inevitably end up with some people being overpaid while others may not achieve proper recognition of their efforts. At best, this is an inefficient use of one of the organisation's scarcest resource, money. At worst it creates dissatisfaction among better employees where they see others less able or committed than themselves receiving equal or higher pay, or equal or higher pay rises. One frequently used model divides the salary range for a grade into five competency zones, each zone of equal width. Assuming a grade salary range equal to plus and minus 20% of the grade midpoint salary, the five competency zones can be represented as follows:

Zone performance level descriptor.Salary range for Zone
as a % of the Grade midpoint salary.
Marginal80 - 87
Adequate88 - 95
Competent96 - 103
Superior104 - 111
Distinguished112 - 120

The organisation's performance appraisal system determines where the incumbent's performance stands in the range 80 to 120% of the Grade salary midpoint. If the rating is say Adequate at 95%, then the incumbent is paid 95% of the Grade midpoint salary. This percentage rating is also called the comparative ratio, or more commonly, the compa-ratio.

This approach has substantial elegance:

  • It allows fairer and more equitable salary levels to be established.
  • It allows across-the-board increases to the salary structure to be implement, such as a cost of living increase, without affecting the performance positions (compa-ratios) of individuals within their grade.
  • It facilitates calculation of the impact of broad salary movements on the structure with and without the impact of reviewed compa-ratios, thereby facilitating forward budget calculations. Using these techniques in conjunction with various assumptions about salary movements, staff numbers, and performance assessments, longer-term planning and 'what if' analyses are possible to facilitate planning several years into the future. (Refer Section 6.0 Long Term Human Resources and Remuneration Planning.)

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Copyright 2004 National Remuneration Centre, Melbourne.