Classification and Compensation
Two related but distinct functions
Classification groups positions into classes based on duties, responsibility, and required knowledge/skills - it answers "what is this job?" Compensation assigns pay to those classes - it answers "what do we pay for it?" The most common exam trap is confusing a reclassification request (driven by duties) with a pay adjustment (driven by market or equity). Changing the incumbent's performance or volume of work does not by itself change the class.
Tools to know
- Job analysis methods: observation, interview, questionnaire, desk audit, incumbent/supervisor logs.
- Job evaluation: whole-job ranking, factor comparison, and point-factor (most defensible and most tested).
- Market data: benchmark jobs, salary surveys, aging survey data to the current date.
- Structure: pay grades with minimum, midpoint, and maximum; steps or longevity increments; broadbanding.
- Compa-ratio = salary ÷ range midpoint. Below 1.0 = below midpoint; above 1.0 = above midpoint.
Concepts that drive questions
Internal equity (are similar jobs paid similarly?) versus external competitiveness (are we near market?). Pay compression occurs when new hires approach or exceed the pay of experienced staff. Pay inversion occurs when subordinates earn more than supervisors. FLSA designation is attached to the class specification, not to the individual.
Traps
- Assuming a range maximum caps pay in all circumstances (longevity, red circles, and CBA provisions may override).
- Using the average of survey data without matching job content.
- Treating a "desk audit" as a performance review - it is a duty-based classification review.
- Forgetting that step increases are typically structural, not merit-based, unless the plan says otherwise.
Rule of thumb
Classify the position, pay the market, and document the rationale - in that order.
Worked example: Range is $48,000–$72,000. Midpoint = ($48,000 + $72,000) ÷ 2 = $60,000. An employee at $54,000 has a compa-ratio of 0.90 - 10% below midpoint.