Defining job grade levels

Job grading creates a categorization system to rank positions based on their relative value to the organization. Positions that are more complex or critical to the company’s operations are usually assigned a higher job grade than positions with fewer requirements or lower expectations.

Organizations often assign specific labels, usually consisting of letters or numbers, to distinguish different grades. These grades typically start at the entry level and progress to senior-level management. Job grades can apply to all departments within your organization and all types of roles.

How do organizations use job grades?

There are two main areas where a job grade is useful: employee pay and promotions or hiring decisions. Pay typically increases as the rank of a position rises. For example, a junior accountant would generally earn less than a senior accountant.

It’s also helpful for assigning salaries to new positions based on their rank compared to other positions. Roles within the same job grade often have the same salary range as one another.

Job grading systems also illustrate the pathway for advancement. Employees can understand the available pathways as they gain experience and skills. Managers also have a clearer idea of how they might develop their team members to prepare them for more senior positions.

When your organization creates a new position, it can use the grading framework to place the role within the company hierarchy. Grading can also guide hiring decisions based on your organization’s needs and budget.

Importance of job grade levels in employee compensation

Developing a job grade framework can help establish a hierarchy within your organization and its individual departments. This structure offers several benefits, including:

• Pay transparency and equity: Structuring positions based on their value to the organization helps you assign pay that is consistent among jobs at the same level. Ensuring pay equity within your organization can help you fairly compensate your staff. It may also help you stay compliant with pay regulations and support a culture of fairness and trust.
• Simplified salary management: When you have clearly established job grades and salary ranges, making salary offers becomes easier when you hire or promote someone. The roles within your company have already been evaluated and ranked, so there is less research needed when you hire someone.
• Improved budgeting: Your organization can refer to the salary bands associated with different job grades to budget for new hires or additional positions. This can also help you anticipate future hires and make better workforce decisions that align with your budget.
• Attracting talent: Transparency about pay ranges and advancement opportunities may attract job seekers who want to understand their potential with your company.
• Career development support: Employees and managers can use the job grades as a guide when completing employee development plans. This may help them identify different paths toward advanced positions within the company.
• Motivation: Seeing the potential for upward movement may encourage some employees to acquire new skills or enhance their performance. This can benefit the company in the short term by improving existing talent and in the long term by creating a pipeline of internal candidates for higher positions.

Establishing job grade levels for your organization

You can use various evaluation methods to determine how to rank the positions within your organization. The following steps offer a general guide for the process.

1. Define the job grade levels

It’s helpful to start with your various grade levels to create the general structure of the system. The number of grades you have can vary depending on your organization’s needs, including the size of your staff and the variation in job complexity.

For example, if there isn’t much difference in responsibility or relative value between the lowest and highest positions, you might not need as many job grades.

Determine a naming system for your levels. This can depend on how many grades you have and how you organize them, but it typically involves letters, numbers or both.

If you have a limited number of job grades, you might stick with a simple numerical system labeled using Roman numerals.

Some organizations use a combination of letters and numbers for more detailed categorization. For example, you might use letters to designate a broad category and numbers to differentiate the rankings within that category. Entry-level roles might be indicated by an A, specialist or individual contributor roles with a B, team leads managers with a C, department managers with a D and senior leadership with an E.

You might then assign levels one through 12 within each category. Higher numbers indicate more complex and higher-ranking positions.

2. Establish criteria for evaluating positions

To ensure your system is fair and consistent, it is helpful to establish clear, objective criteria for ranking positions. This often involves identifying the factors you will use to assign a ranking, such as:

• The complexity of the responsibilities
• The skills and qualifications required
• The amount of expertise or specialized knowledge needed
• The number of years of experience required for the role, if applicable
• The of decision-making authority associated with the roles
• The role’s influence on the organization as a whole
• The level of communication required with various stakeholders

Within each category, you might assign points or further break down the criteria. For example, you might identify various levels of decision-making power a role could have. A position with less decision-making authority might rank near the bottom of the leveling system, while a role with more decision-making autonomy would rank higher.

Establish criteria based on your organizational needs and the number of job grades you define. It can be beneficial to create a written document that clearly outlines all criteria for transparency and ease of implementation.

3. Perform market research

Understanding market conditions can help when developing your job grades and associated pay ranges. This information helps you align your rankings and pay structures to offer your team comparable opportunities.

This may involve examining how similar companies rank and categorize jobs. Salary data for your specific industry, particular positions and geographical area can all contribute to developing competitive options for your company.

4. Establish salary bands for each grade

Each job grade typically has the same salary band across the board. This means the salary band for someone in the marketing department would be the same as for someone in the manufacturing department if the positions fall into the same job grade.

Your market research can help you assign the salary bands. The lower and upper ends of the bands may overlap with nearby grades, or you might avoid overlaps to ensure employees receive a salary increase when they advance to a higher job grade.

5. Conduct a job analysis for each role

Apply the criteria you established to each role within your organization. It can be helpful to involve multiple people in the analysis process to reduce bias.

To conduct the analysis, you will need details of each position. The job description can be a good source of information regarding the responsibilities and qualifications for the position.

However, you may need more input on the specifics of the job. Interviewing individuals in those positions or speaking with the supervisors of different roles can help clarify the details. Employee surveys can also be useful for collecting data from a larger number of people in those roles.

6. Consider typical advancement pathways

It can also be beneficial to think about the natural progression through your organization. Look at how a person might advance from an entry-level role to a specialized or experienced position with more responsibility and then into management.

Once you determine a job grade for a position, you can use that to help place lower- or higher-ranking positions within that natural progression. For instance, if you rank an administrative assistant at level IV, you might place a data entry clerk below that at level III. An executive assistant might be assigned to level V, while an office manager might be placed at level VI.

7. Assign a grade level

Using the analysis methods and the criteria you established, you can assign a job grade to each position. Create a chart that includes all current positions within the organization. If you develop a new role, you can evaluate it using the same criteria and add it to the chart.

8. Implement the system

Decide how you want to implement your job grade system. You can apply it to the organization as a whole or start with a small pilot group. Starting small can make adjustments easier and help you identify potential issues to correct.

You may need to make adjustments for your current team members once you implement the grading system. This depends on how you currently assign salaries and job titles. It’s often helpful to announce the grading system, especially if it’s completely new, before you implement it. This allows you to explain the system and your reasoning for using it.

The evaluation may reveal that some positions or individual contributors aren’t receiving an appropriate base salary based on the ranking of their roles. To align your job grading and salary system, you may need to increase those salaries accordingly.

Best practices for managing job grade levels

Following these best practices can help you develop and implement an effective job grading system:

• Get input from team members. Incorporating feedback from your HR team, hiring managers, employees and leadership can help you create an effective, accurate system. This input may also improve alignment across teams, enhancing the grading system’s benefits.
• Be consistent. All jobs should typically go through the same evaluation process to create consistent job grades. This helps maintain fairness in rankings.
• Evaluate and make changes. Your needs for grading positions may change as your company grows. You may need to adjust your system as market conditions change. Regularly reviewing the grades and the processes for assigning them will help you continuously improve the system.
• Make the process as objective as possible. Evaluating each position with fair, objective criteria can increase the accuracy of the system. It can also reduce the risk of bias in the workplace regarding salary or promotions.
• Train HR staff members and hiring managers. Training your HR staff and hiring managers on the grading system can be beneficial. This helps them better understand the system’s purpose and how it might affect their hiring processes. Training is also important for HR professionals who may be responsible for assigning job grades for new positions.
• Offer transparency. Making the job grading system available to your employees and job applicants can increase transparency in the workplace. It’s also beneficial to be open about how employees can advance through the levels or why a particular role is assigned its job grade. You might include a detailed guide about the levels and provide an FAQ document for employees.

Frequently asked questions about job grades

What’s the difference between a job grade and a job classification?

Job grades and job classifications both categorize positions, but they do so on different scales. Job classifications are often used to group roles with similar duties and responsibilities.

They’re generally broader and don’t focus as closely on relative value. For example, classifications might include entry-level, individual contributor, mid-level management and senior management.

Alternatively, they could be classified by department or job type. Job grades, on the other hand, often emphasize the complexity of the job and its contribution to the organization.

How can you tell if your job grading system is effective?

With an effective job grading system, your organization can implement salaries consistently. Employees are typically satisfied with their pay based on their responsibilities and qualifications. All team members generally understand how the system works and agree that it is logical and fair.