Section Fourexamining these approaches, a review of traditional
compensation systems should be helpful.
Traditional Compensation Systems
Millions of employees are compensated through traditional job-
based pay systems. Such systems typically incorporate the use
of job analysis to determine the knowledge, skills, and abilities
required to perform jobs. Job analysis information is then
incorporated into the process of job evaluation, which
determines the relative standing of each job in the salary or
wage hierarchy of an organization. Essentially, the process of
job evaluation involves a review of each job to determine the
extent to which compensable factors are present. Typically,
jobs are evaluated on only a small set of compensable factors
such as knowledge, know-how, accountability, effort, and
problem solving. The point system is a common job evaluation
approach, which uses a job evaluation manual to assign points
to each job on the basis of compensable factors. Another job
evaluation system is the factor comparison system, which
involves a rather complicated approach of comparing jobs
directly with each other in order to determine differences in the
presence of compensable factors. Hybrid systems, which often
involve a combination of the point system and factor
comparison system, also are widely used. An example of a
hybrid system is the Hay Guide Profile Method. Traditional