Operations Management and Strategic Management · Job Evaluation, Job Allocation - Assignment

Job Evaluation and Merit Rating: Methods and Differences

Updated 10 October 2026 · Fact-checked

Job evaluation rates the worth of a job, not the person doing it, to fix a fair pay structure. Methods are ranking, grading, point rating and factor comparison. Merit rating assesses an individual employee's performance and is used for increments and promotion. In exams, state the method steps, then contrast the two.

Understand Job Evaluation and Merit Rating

A job is a set of tasks and duties. Job evaluation is a systematic way to find the relative worth of each job in an organisation. It looks at the job's demands: skill, effort, responsibility and working conditions. It does not look at who holds the job. The result is a ranking of jobs that supports a fair wage and salary structure.

The main objectives are:
- Set up a logical, defensible pay structure.
- Remove pay inequity between similar jobs.
- Help in fixing wages for new jobs and in wage negotiations.
- Give a base for classifying jobs into grades.

Job evaluation methods are of two types. Non-analytical (non-quantitative) methods compare whole jobs: ranking and grading (classification). Analytical (quantitative) methods break each job into factors: point rating and factor comparison.

Merit rating is different. It appraises how well an individual employee performs the job: quality of work, attendance, initiative, reliability, and similar traits. It is used for increments, bonus, promotion, transfer and training needs.

The link between them: job evaluation fixes the pay range of the job, and merit rating decides where within that range an individual is placed.

Key rules to remember

Point rating: total job points: Total points of a job = Σ (points assigned to each factor for that job); Factors usually include skill, effort, responsibility and working conditions, each with weighted degrees.
Point rating: wage per point: Money value of a point = Total wage bill for the benchmark jobs ÷ Total points of those jobs; Multiply by a job's points to get its wage. Use only if the question gives a total pay and points basis.
Factor comparison: job wage: Job wage = Σ (money value allotted to each factor for that job); Each key job's existing wage is split across factors, and other jobs are compared factor by factor with key jobs.
Ranking method: Rank jobs from highest to lowest by overall difficulty and worth; No factors or points. Simple, but subjective.

How to solve Job Evaluation and Merit Rating questions

Use this plan for any theory or numerical question on job evaluation and merit rating.

1Define job evaluation first: it rates the job, not the person.
2State the objective asked for, or the method named in the question.
3Describe the method in order of its steps (see the method notes below).
4For numericals, list factors and points in a clear table-like layout, then add the points per job.
5Convert points to money using the given wage per point or benchmark wage.
6Mention one advantage and one limitation of the method.
7If asked to differentiate, give points on basis: subject, purpose, focus, outcome and use.
8Close with one line linking job evaluation to pay and merit rating to individual rewards.

Quickest way: Four-method memory line

When to use it: Use when you must name and describe the methods in a short answer or an MCQ.

Ranking: jobs put in order, whole job compared with whole job.
Grading: predefined grades are written, then jobs are fitted into grades.
Point rating: factors get points, job total points convert to pay.
Factor comparison: key jobs' wages are split by factor, other jobs are compared to them.
Remember: first two are non-analytical, last two are analytical.
Remember: job evaluation = job, merit rating = man.

Common mistakes in Job Evaluation and Merit Rating

Saying job evaluation assesses the employee's performance.
The two terms sound alike and both relate to pay.
Fix: Write that job evaluation rates the job's worth; merit rating rates the person's performance.
Mixing up ranking and grading.
Both are non-analytical and use whole jobs.
Fix: In ranking, you order the jobs against each other. In grading, you first define grade descriptions and then place each job in a grade.
Calling factor comparison a points method.
Both split jobs into factors.
Fix: Point rating uses points and then converts them to money. Factor comparison uses money values directly for each factor.
Adding points without checking factor weights.
Students rush through the table.
Fix: Read the weights or maximum points per factor, and recheck each total before converting to wages.
Giving no limitation of the method.
Students stop after describing the steps.
Fix: Add one line: ranking and grading are subjective, while point rating and factor comparison take more time and cost.

Worked examples

Example 1

Using the point rating method, a firm gives points to three jobs on four factors. Job A: skill 40, effort 20, responsibility 30, working conditions 10. Job B: skill 50, effort 30, responsibility 40, working conditions 20. Job C: skill 30, effort 20, responsibility 20, working conditions 10. The firm pays ₹200 per point per month. Find each job's total points and monthly wage, and rank the jobs.

Show the solution

Job A points = 40 + 20 + 30 + 10 = 100.
Job B points = 50 + 30 + 40 + 20 = 140.
Job C points = 30 + 20 + 20 + 10 = 80.
Wage A = 100 × ₹200 = ₹20,000.
Wage B = 140 × ₹200 = ₹28,000.
Wage C = 80 × ₹200 = ₹16,000.
Rank by points: B first, A second, C third.

Answer: Job A: 100 points, ₹20,000. Job B: 140 points, ₹28,000. Job C: 80 points, ₹16,000. Ranking: B, A, C.

Example 2

Distinguish between job evaluation and merit rating.

Show the solution

Subject: job evaluation rates the job; merit rating rates the employee.
Purpose: job evaluation fixes the basic pay structure; merit rating decides increments, bonus and promotion.
Basis: job evaluation uses job demands such as skill, effort, responsibility and conditions; merit rating uses personal traits such as quality of work, reliability and initiative.
Frequency: job evaluation is done when jobs are created or changed; merit rating is done periodically, often yearly.
Outcome: job evaluation gives a job hierarchy and grades; merit rating gives an individual performance score.
Link: job evaluation sets the pay range; merit rating places a person within that range.

Answer: Job evaluation measures the relative worth of jobs to set a fair pay structure, while merit rating measures an individual's performance to decide increments and promotions.

Exam tips

Questions often ask for the difference between the two terms. Prepare five clear points and write them as a list.
For method questions, always state whether the method is analytical or non-analytical.
In point rating numericals, show the sum of points per job before converting to money.
Keep a one-line advantage and limitation ready for each method. They add step marks.
In MCQs, check whether the statement refers to the job or the person. That alone decides many options.

Practice questions from Job Evaluation, Job Allocation - Assignment

Job Evaluation and Merit Rating: frequently asked questions

What are the methods of job evaluation?

The four common methods are ranking, grading (job classification), point rating and factor comparison. The first two are non-analytical and the last two are analytical.

What is the main difference between job evaluation and merit rating?

Job evaluation rates the worth of a job to fix its pay. Merit rating rates how well an employee performs, to decide increments, bonus or promotion.

How does the point rating method work?

You pick compensable factors and give each a weighted number of points by degree. You add the points for each job, then convert total points to a wage using a money value per point.

How is factor comparison different from point rating?

Factor comparison splits the wages of key jobs into money amounts for each factor, and compares other jobs to them factor by factor. Point rating uses points first and converts them to money later.