What is job grading - and why is it so important?
Job grading is a synonym for job evaluation. It’s a HR process that involves breaking down and analysing all of the requirements of a job role. This can encompass job responsibilities, required education, necessary skills and - if relevant - the working conditions.
With all of this data, it’s possible to establish a rank order of roles within an organisation. But job evaluation isn’t about rating current employees; it’s about quantifying the roles themselves. It’s a value-driven approach that disentangles a job’s value from the price of labour.
Not only does this create a solid framework on which to build a consistent, rational compensation structure, but it also identifies work of equal value. And why’s that so important? Because defining work of equal value is at the core of pay equality.
Crucially, job grading allows companies to establish their own internal compensation hierarchy that doesn't rely solely on external market data. Because, whilst keeping a pulse on what similar companies are paying for similar roles keeps compensation competitive, it doesn’t necessarily make it consistent or equitable.
Ultimately, job grading allows companies to establish a fair and rational rewards structure. It acts as a solid framework that can be fleshed out with other valuable structures such as pay bands and pay scales.
What does job grading have to do with the EU Pay Directive?
It’s a seismic shift that’s been on the horizon for a while. Signed into law in spring 2023, all EU countries must implement the Directive into national law by June 2026. The wide-reaching requirements include mandatory pay gap reporting and providing pay transparency to job seekers.
At the very core of the Directive is an enforced expectation that workplaces analyse and refine their job architecture. It’s the only way they’ll be able to effectively - and accurately - categorise employees who are performing work of equal value, and to ensure discriminatory rewards practices are detected and remedied.
As it stands, many companies in the EU simply don’t have this job architecture in place. In fact, many don’t have a system in place to identify what constitutes equal work within their organisation - let alone a way of effectively analysing their gender pay gap.
For a lot of organisations, getting prepared for the Directive is set to be a Herculean task. Building a job architecture from scratch is likely to overwhelm SMEs with small - or even single person - HR departments. Equally, hiring external consultants is a huge financial investment - and not one that all organisations can afford to make.
The result? Many companies are simply burying their heads in the sand. Others are relying on in-house excel-based solutions to try and make sense of data and put roles in rank order.
The problem here goes beyond HR departments working overtime. An ineffective job evaluation system will make it impossible to successfully comply with the EU Directive’s requirements. Lack of compliance could come with legal ramifications and damaging penalties.
Setting up a solid, legally justifiable job architecture isn’t something that can be set up overnight. It takes a serious amount of data, time and coordination to put in place.
The good news is, companies can start preparing now. This gives them plenty of time to iron out any problems before compliance becomes a requirement in 2026.
What’s the solution for companies without a solid job architecture in place?
As we’ve seen, it all starts with job evaluation. Job grading is the foundation of any well-built job architecture. It’s also a vital precursor to defining equal work - and therefore ensuring equal pay.
And when used as a base for other more complex HR processes, it can seriously optimise an organisation’s recruitment, retention and growth.
Job evaluation should be available to all businesses, no matter their size. Instead of relying on expensive external consultants, we need to empower HR departments to carry out job grading exercises themselves.
gradar is transforming the industry by helping HR professionals do just that. By creating an accessible, affordable and transparent job evaluation system, businesses big and small can easily carry out their own job evaluation exercises in-house.
As well as objective, point-factor based job grading, gradar offers a whole host of progressive features such as gender pay gap analysis, salary band creation and market benchmarking.
So, as new pay transparency laws - including the EU Pay Directive - come into full force, companies can be sure that they’re not only complying, but also optimising their internal and external pay practices across the board.