Pay decisions are made within the framework of the compensation structure. Some form of job evaluation method is used to assess the value of jobs systematically and assign jobs to salary grades, which in turn are given a range of salaries. This procedure defines an internal value hierarchy based on comparisons of jobs by their contribution to organizational objectives. Internal equity, then, rewards jobs of equal value with the same amount and pays jobs of different value according to some set of acceptable factors.
All systems of job evaluation—the most widely used of which is the point factor method—are premised on the need to identify criteria relative to job value (e.g., responsibility, working conditions, skill); jobs are then ranked in the hierarchy on these criteria. Despite its facade of objectivity (and resulting drawbacks), job evaluation retains a measure of face validity and thus remains the basis of internal equity in most organizations.
Integrated systems try to balance longevity and managerial discretion.
