The point method, also called the point factor method, is commonly used to determine the pay range for a job as part of the evaluation process. The work analysis and job description drives the point method. It identifies and rates a variety of factors to determine the value of the job to the organisation and in the external labour market.
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The point method uses the identification and evaluation of compensable factors related to a job. These are the factors for which an organisation is willing to pay an employee, based on the organisation's mission and strategic objectives. Four generic categories of compensable factors, first identified in the Equal Pay Act of 1963, are skills, work effort, responsibilities and working conditions. Specific examples of compensable factors include education, work experience, management or supervisory responsibilities, work complexity, decision making and budget authority, customer service relationships and physical or environmental demands of the job.
The point method begins with the work analysis and job description development. Five to 12 compensable factors are identified and defined based on this information. Then, each compensable factor receives a degree rating based on the requirements of the job. The degree ratings establish the steps in a career path or job family. Each factor then receives points, with an organisation determining its own point range. You calculate the points for all the factors in a job, along with its degree, to determine the importance and overall value of the job to the organisation.
A compensable factor for an administrative assistant would be computer skills. This position is a step in office support staff career path that includes receptionist with a degree rating of one, administrative assistant, degree two, executive assistant, degree three, and office manager, degree four. Administrative assistants require stronger computer skills than receptionists; so, the assistant job would have 35 points for computer skills and the receptionist would have 20 points. When totalling points for all the compensable factors in each job, the degree one job of the receptionist might have a total point value of 100; the administrative assistants in degree two have 200 points; executive assistant in degree three has 300 points; and degree four of the office manager has 400 points.
The point method establishes the value of a job in a measurable way to which you can assign a dollar value based on reliable job documentation. It allows job comparisons and allows employers to group similar jobs into a job family or career path with specific steps, levels or degrees. You can apply it to a wide variety of jobs, including newly created jobs.
The point method is complex and time consuming. It may be difficult to explain to employees who want to know how you determine their pay rate. It requires current, accurate job descriptions, which may not exist. Moreover, definition and value determination for each compensable factor uses subjective judgments. For the point method to be effective, compensation specialists must constantly evaluate the method's results in the context of the external labour market. You must reflect changes in the market by changes in the organisation's pay structure.
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