Why is it important?
Creating a system
What is job classification?
Job classification refers to a system of ranking different positions within an organization. Organizations usually base rankings on the various skills, qualifications, and responsibilities required for a particular role. Companies typically categorize jobs using a job classification system so they can easily organize roles internally and determine a hierarchical system of pay grades for employees. Job classification is also useful for defining necessary training, support, and benefits for different positions.
As individual companies usually create their own job classification systems, comparing similar roles between industries is not always accurate. However, businesses do aim to classify jobs similarly for accurate industry-wide comparison. The UN describes two main ways organizations can implement job classification and determine a salary hierarchy.
Based on position: This approach involves offering a fixed salary to anyone in a certain position based on the responsibilities they will have to execute for the role.
Based on personal credentials: This approach involves establishing the salary based on an individual’s qualifications or seniority.
Some simple examples of how companies might choose to classify jobs include differentiating between entry-level, mid-level, and senior roles, or defining job areas such as administrative jobs, professional jobs, and management jobs. Some common factors businesses may look at to determine categories include knowledge levels, responsibilities, and accountability required for the role.
Why use job classification?
Job classification is advantageous in the realm of hiring and recruitment. Not only can it help employers create effective and comprehensive job descriptions, it can help both employers and job candidates accurately enter roles that match their skill sets.
A classification structure streamlines the hiring process and saves recruiters and applicants time. It also boosts job satisfaction and employee loyalty, minimizing employee turnover. This can save companies significant hiring and training costs in the long term.
A job classification system is also key to establishing a fair payment structure within a company. Ensuring that same-level employees get compensated similarly helps avoid the risks of pay discrepancies and unconscious bias. A clear job level structure allows employees to see opportunities for career progression, which may motivate them to remain with the company.
How to create a job classification system
Creating a job classification structure can be complex and tedious.
You will first need to list out and gather information on all the positions in your company, grouping them into categories. You may group by experience level (e.g. entry-level or C-suite), by skills (e.g. admin or finance), and by function (e.g. order processing or accounting).
You should then define a list of standards for each category that includes the skills and qualifications needed. Finally, you can rank every position into a hierarchy and link each one to a specific pay grade.
Researching industry pay standards and labor laws in the country where you operate can help you determine pay grades and benefits. If you hire employees remotely around the world, you will need to decide whether you will offer a standard salary and benefits based on responsibilities or whether you will adapt salaries based on local costs of living.
Common job level classifications
Companies typically classify jobs in a hierarchical structure, often following a similar structure.
Usually the most junior positions in an organization, entry-level roles require only basic skills, minimal experience, and no or few qualifications. They usually receive low to moderate pay. An entry-level position can often be a stepping stone for career progression, with opportunities to learn and receive training on the job.
Mid-level roles usually require moderate to advanced skills and industry expertise. They should have some experience in a relevant field with a substantial understanding of their role and sector. Mid-level employees likely have more autonomy and may need to make decisions and solve problems.
Senior-level positions require high levels of experience and significant responsibility. Employees at this level often offer specialized knowledge and make critical decisions that impact the success of the organization.
Employees in managerial roles typically oversee and coordinate the work of employees, departments, or projects. They usually have experience in supervision or leadership and play a vital role in driving employee performance and working towards company goals.
Directors tend to oversee and manage larger divisions within the organization. They often make strategic, high-level decisions and report directly to senior executives.
This level includes the highest-ranking executives, such as the CEOs, CFOs, and COOs. They typically fall into the highest-paid level of a job classification system. C-level executives typically work on an organization’s strategic plans and are accountable to the board and shareholders.
Depending on specific organizations, there may be additional levels in a job classification structure, including people with skilled trades or special technical skills, support or administrative level staff, or specialists on a particular subject matter.
When classifying jobs:
Develop clear and accurate job descriptions that outline roles, responsibilities, and qualifications.
Understand and comply with any relevant labor laws and regulations related to job classification.
Establish a consistent and transparent job evaluation process to assess the relative value of each position within the organization, considering factors like skills, responsibilities, and qualifications.
Periodically review and update job classifications to reflect changes in roles, responsibilities, and industry standards, ensuring ongoing accuracy and relevance.
Communicate job classifications clearly to employees, including the criteria used for classification and the implications for compensation, benefits, and career development.
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