What is Factor Comparison Method?
The Factor Comparison Method is a job evaluation technique that breaks down roles into defined compensable factors (such as skill, effort, responsibility, and working conditions), compares jobs against benchmark positions for each factor, assigns monetary values to those factor rankings, and then uses the resulting values to determine the relative worth and pay structure of each job.
Why the Factor Comparison Method Matters in HR
This method enables HR teams to establish fair, transparent and internally consistent compensation frameworks. Because it links job value directly to measurable factors, it supports equitable pay decisions and helps align the organisation’s pay structure with its role-based contributions. At the same time, the Factor Comparison Method is resource-intensive and complex—highlighting that while it can bolster fairness, it also demands significant time and expertise.
How the Factor Comparison Method Works
The process typically follows these steps:
- Select benchmark jobs: Identify key roles across the organisation that serve as reference points for comparison.
- Define compensable factors: Choose the set of factors that will be used across jobs, such as skill, mental effort, physical effort, responsibility, and working conditions.
- Rank jobs per factor: Compare each benchmark job against each factor independently, determining their relative standing.
- Assign monetary values: Allocate dollar values to each factor and level, based on how the benchmark jobs are ranked.
- Evaluate other jobs: Use the benchmark values to assess other jobs by comparing their factor levels and summing the valuations to arrive at a job’s total worth.
- Establish pay structure: Organise jobs with similar total value into pay grades and set salary ranges accordingly.
Tip: Because the method assigns a monetary value to job factors, it provides a defensible framework for compensation decisions—especially in large, regulated or unionised environments.
