How much is each role truly worth to your organisation? This question is at the heart of fair, effective compensation. But too often, the answer is based on guesswork and intuition.
That’s where job evaluation comes in. By carefully assessing the value of each job, you can build a fair, transparent pay structure that’s aligned with your business needs. We’ll explore what job evaluation really means — and the different ways you can approach it — in this article.
With the EU Pay Transparency Directive just around the corner, fair and equitable compensation has never been more important. Keep reading to the end to find out how job evaluation can help you meet the directive's demands.
What is job evaluation?
Job evaluation is the process of determining the value each job role brings to your organisation. It gives HR teams and company leaders a solid foundation for setting fair pay, aligned with the company’s compensation philosophy and policies. This makes job evaluation a vital tool for achieving equitable compensation — and complying with pay equity legislation like the EU Pay Transparency Directive.
Importantly, job evaluation is about assessing jobs, not people. When it’s done right, you’ll end up with a pay range for each role based on factors like responsibility, required skills, working conditions and business impact. You can then choose to reward individual factors like performance, seniority, qualifications and tenure by increasing pay within that bracket.
Job evaluation can support your organisation by helping you:
- Build a fair, competitive pay structure
- Set salaries for new positions
- Align pay across similar roles
- Identify and correct pay inequities
Job evaluation vs. job analysis
Job analysis and job evaluation are closely linked concepts, but they serve different purposes. While job evaluation compares each role’s overall worth to the organisation, job analysis is about understanding what the role actually entails. In other words, job analysis forms the foundation for job evaluation: it tells you what a job is, while job evaluation determines how much it’s worth.
Job evaluation vs. job levelling
Job levelling is about organising roles into a clear hierarchy based on factors like responsibility, required skills and impact on the organisation. These levels are then used to assign pay ranges to groups of similar roles. You can think of job levelling as just one approach to job evaluation — which we’ll explore in more detail further on. Job levelling is sometimes referred to as job classification.
Key benefits of job evaluation
Job evaluation involves carefully considering each role, weighing it against others to determine its overall value to the business. And there’s no getting around it: that represents a lot of work for you and your team.
That said, effective job evaluation can more than pay for itself through the benefits it brings to an organisation. Here are some of the main advantages:
- Supports pay equity: At its core, job evaluation is about aligning compensation for each role with its real value to the organisation. That means it helps ensure everyone is paid exactly what they’re worth.
- Ensures competitive pay: Job evaluation can also help companies develop salaries that attract top talent, especially when you take market data into account.
- Facilitates workforce planning: Effective job evaluation helps companies identify which roles are most critical to their business. This enables smarter resource allocation and streamlined budgeting.
- Promotes pay transparency: Job evaluation provides a clear, logical and consistent basis for pay decisions, providing crucial context for conversations with employees about pay. This makes it easier for managers and HR to adopt a more transparent approach to compensation.
- Supports compliance with pay equity legislation: Accurately valuing roles is essential for meeting legal requirements like those in the EU Pay Transparency Directive. We’ll talk more about the link between job evaluation and new pay equity legislation at the end of this article.
Different approaches to job evaluation
There are several ways to approach job evaluation, each with its own pros and cons. The best method for your organisation will depend on its size, structure and goals. Job evaluation methods can be:
- Qualitative or quantitative: Qualitative methods rely on subjective assessments and comparison, which makes them quicker and easier to implement. Quantitative methods, on the other hand, assign numerical values to specific job factors. That means they can offer greater objectivity and consistency.
- Internal or external: Most approaches use internal data to assess the value of each role within your organisation. However, some also incorporate external data — such as salary benchmarks — to ensure pay is competitive. Many organisations use a mix of both methods to balance internal consistency and market alignment.
Let’s take a look at some of the most common job evaluation methods that you could choose to implement at your organisation.
Point-factor method
This is the most widely used quantitative approach. It involves assigning points to job characteristics that influence compensation, such as problem-solving, technical knowledge and accountability. Each role is scored based on these factors, allowing for easy comparison across roles. The result is a clear, consistent ranking based on total points.
Job classification
This method groups jobs into predefined levels or ranks — for example: coordinator, manager, director and VP. Organisations often build separate tracks for managers and individual contributors. Levels are based on factors like responsibility, skill and seniority. This structured approach supports career progression and internal consistency.
Ranking method
This method involves comparing roles in pairs and selecting the one with the greater impact on the organisation. This creates a forced ranking of different jobs based on their overall impact on the organisation. While simple and cost-effective, it’s best suited to smaller organisations. You may also choose to enhance it with another method for a more thorough and objective analysis.
Factor comparison method
The factor-comparison method is something of a hybrid between the point-factor and paired comparison methods. Like the point-factor method, it involves breaking each job down into characteristics like decision-making, problem-solving and leadership. However, instead of allocating a certain number of points to each factor, the factor comparison method involves benchmarking against predetermined roles.
Hay job evaluation system
The Hay job evaluation system is a data-driven, quantitative approach to job evaluation developed in the 1950s. It considers factors like knowledge, problem-solving, accountability and working conditions, which are weighted according to a guide chart. Like with the point-factor method, you’ll end up with an overall numerical score for each job. This method is extremely thorough, but can be resource-intensive.
Market pricing method
The market pricing method is the only method on this list based on external data. It uses salary surveys or benchmarking tools (like Figures) to evaluate roles against market rates. This method helps companies ensure their salaries are externally competitive, but doesn’t consider each role’s value to the organisation. Pairing it with another method can provide a more well-rounded evaluation.
Why job evaluation matters in 2025
If you’ve been paying attention to the rollout of the EU Pay Transparency Directive, you’ve likely come across the concept of ‘equal pay for work of equal value’. This is a core principle of the directive… but what does it actually mean in practice?
In short, it depends: the directive leaves the definition of ‘work of equal value’ largely up to employers. But that doesn't mean they’re free to base pay decisions on hunches or intuition. Any discrepancies will need to be backed by fair, gender-neutral and objective criteria.
All of this is to say that effective job evaluation is about to become absolutely crucial to employers in Europe. After all, job titles alone are rarely a reliable indicator of value, and companies will need a structured way to assess roles and justify pay decisions. In 2025 and beyond, robust job evaluation isn’t just a best practice — it’s a legal and strategic necessity.
