Many organisations group jobs into grades or bands. Jobs in the same grade or band are treated as being equal. This may be because the jobs received similar scores under a job evaluation scheme, or because the organisation sees them as broadly equivalent. This makes it easier for you to apply the same pay and other contractual terms and conditions of employment to them.
A job grading structure provides a consistent framework for managing a pay system. It usually consists of either a series of grades with pay ranges attached to each one, or a single pay spine divided into grades at incremental points.
A grading structure can also be aligned to market rates for your sector, with employees progressing through the points within their grade. If this leads to difficulties with recruitment or retention for some specialist roles, you can pay a market supplement – provided you observe good equal pay practice.
Used properly, a job grading structure should ensure that jobs of equal value are paid equally.
Developing a job grading system
If you are updating a job grading system - or designing a new one following an analytical job evaluation - be careful not to build in any potential problems.
Before you can decide how your new structure will work, you need to look at the roles in your organisation as they stand and where those roles would fit into a new grading structure.
You should avoid having too many grade structures or grades, as these can increase the risk of equal pay issues. So, too, can any overlaps between grades. Important factors to bear in mind include:
- A single grading structure based on analytical job evaluations will provide fairness and a possible defence to equal pay claims
- Fewer grades with clear, objective reasons for progression through them are likely to be fair and justifiable
- Avoid overlapping boundaries. It could lead to someone in the higher grade of one job being paid more than someone in the lower grade of a more senior job, which may be hard to justify if challenged.
- In some instances job families – rather than grades - may be considered appropriate. For example, when jobs related to each other are grouped together, such as the IT team.
If managers have discretion over how people are graded, this should be centrally monitored. The greater the degree of managerial discretion, the greater the need to ensure that managers are trained in how to apply common standards and avoid bias.
Transparency in job grading is important. A clear, easily understandable job grading framework avoids uncertainty and perceptions of unfairness and reduces the likelihood of equal pay claims.
Key questions to consider
In updating or designing your job grading structure, you need to look at the average pay of men and women in each pay grade or band. If there are any differences, you must be able to justify them, or you run the risk of an equal pay claim.
The following questions will help you focus on the key requirements of an acceptable grading structure. In each case, ask yourself if there are there any gender differences.
- What points in the pay range are employees placed on when they are recruited or promoted?
- What points in the pay range are employees placed on when they are assimilated into a pay structure after a restructuring or regrading exercise?
- At what rate do employees progress through the pay range?
- Do male and female employees have equal access to and receipt of all additional payments (for example bonus, overtime) and benefits (for example medical insurance)?
- What is the relative impact of performance pay on male and female employees?
A note on paying the ‘going rate’
Real or perceived market forces may lead you to move some people to a higher point in the pay range or provide additional payments. When considering this, you need to ensure that this doesn’t inadvertently lead to unequal pay within the grading structure. Check your existing pay system. If you find this happens a lot, it probably means the whole system needs updating.
Job evaluation is the route to a fair grading structure
The most effective way to design and implement a fair job grading system is to carry out an analytical job evaluation that covers all employees.
Although not mandatory, job evaluation is one of the most important tools for reviewing and assessing your whole pay system and ensuring you meet your obligations under the Equality Act 2010.
While every effort has been made to ensure that this advice is accurate and up to date, it does not guarantee that you could successfully defend an equal pay claim. Only the courts or tribunals can give authoritative interpretations of the law.
Last updated: 19 Feb 2019