Compression is a relationship problem between pay and experience, and job evaluation is how you establish defensible internal worth in the first place.
What compression is
SHRM defines pay or salary compression as pay for one or more employees sitting very close to the pay of more experienced employees in the same job, or employees in lower-level jobs paid almost as much as colleagues in higher-level jobs, including managerial positions.
Three things it is not:
- A range spread narrower than 20 percent. That is a structural feature of the range.
- Merit budgets cut for two or more consecutive years. That is budget restraint.
- Pay clustering at the top of the range because incumbents have long tenure. That is range maturity, the opposite pattern.
The three methods the case names
SHRM's teaching case names exactly three job-based evaluation methods: the point method, ranking and classification, and calls the point method the most commonly used. Factor comparison appears in the wider textbook taxonomy but not in this case, so a four-item list including it is wrong here. Market pricing is not on the case's list either.
Qualitative against quantitative
- Qualitative, whole-job approaches: ranking, paired comparison, alternation and classification. Classification is used mainly for government jobs.
- Quantitative: chiefly the point method, plus the Hay system. The point method assigns points to compensable factors and subfactors, which makes it more structured and therefore easier to defend.
The trap is the reversal: putting the point method or the Hay system among the qualitative approaches, or ranking and paired comparison among the quantitative ones.
Ranking
Ranking is the most basic method, used by small firms, applying subjective ratings against a single criterion such as job complexity. Classification instead slots jobs into predefined grades. The Hay system is a quantitative proprietary system, not a single-criterion subjective one.
Carry this: the point method is quantitative and defensible because it decomposes the job into compensable factors; ranking is quick, subjective and single-criterion.