Hay System 101: The Popular Job Evaluation Method

The Hay System is a job performance evaluation system widely used in many regions of the world, especially in North America and Europe. First developed in the mid-20th century, by Edward N. Hay, the system is designed to provide a structured and data-driven approach to performance evaluation by determining the relative worth of different jobs in the organization. HR leaders often use this methodology to evaluate jobs and determine salaries.

While it is quite a relevant approach, things have certainly changed in today’s business landscape. But considering the challenges of the unstable employment market, the Hay System remains relevant and a valuable tool for effective workforce management.

Hay Approach For Compensation

this methodology helps HR leaders in deciding how much to pay people for their work. Using Hay System, a job is evaluated by considering the:

1. Knowledge required to perform the job
2. Type of problem-solving skills needed for common job challenges
3. Assigned responsibilities or accountabilities

Each factor further includes two-to-three sub-factors.

Also Read: Effective compensation philosophy

Factors in Hay System

1. Accountability – It’s the output factor. It’s safe to assume that every job exists to deliver results in order to drive business impact. This factors measure the type and level of value a particular job can add. It has 3 dimensions.
   1. Freedom to act
   2. Nature of Job’s impact on organizational results
   3. Magnitude of impact
2. Knowledge – To take the accountability of any job, it is required to have the proper knowledge. It also has 3 dimensions.
   1. Practical knowledge,
   2. Planning, organizing, staffing, directing, and controlling resources
   3. Communication and influencing skills
3. Problem Solving – It is known to have the following two dimensions.
   1. Freedom to think – evaluates how much problem solving is guided and shaped by strategy, policies, historical precedents, established procedures, and regulations
   2. Thinking challenge – complexity of the thinking required to arrive at solutions that add value

Though there are numerous benefits of Hay System but it also has its share of disadvantages and limitations such as – complex in implementing and maintaining, very resource-intensive, time-consuming, very expensive and rigid.

Download our e-book on Quarterly performance review!

Alternatives to Hay Method

1. Point Factor System: similar to Hay system, it assign points to various factors or dimensions of a job and determine the job’s relative value.
2. Market Pricing: This method doesn’t rely on internal factors but assesses job value by comparing it to market data or industry benchmarks
3. Job Ranking: This method ranks the jobs in an order based on their perceived value within the organization
4. Job Classification/Grade System: This method groups jobs into classes and grades based on multiple factors such as skill set required, responsibilities and qualifications and based on grade, it determines a specific salary range.
5. Factor Comparison Method: This method looks at internal factors and industry benchmarks. It assigns a monetary value to various factors or dimensions such as responsibility, skill, and effort, and then compares these factor values to determine job worth.
6. Market-Based Pay Structures: Completely based on market data or industry benchmarks – mostly used in highly competitive markets.
7. Skill-Based Pay: This method doesn’t consider the nature of job but determines pays based on employees’ skills and competencies.
8. Competency-Based Pay: This method determines the pay based on the competencies or skills shown by employee, regardless of their title or role
9. Pay for Performance: This method determines the pay based on employee’s performance and it is mostly adopted by tech companies globally.

Meet Peoplebox !

Peoplebox is an all-in-one OKR and performance management platform that helps organizations align their core competencies with business goals. By integrating competency mapping, real-time feedback, and performance insights, Peoplebox empowers teams to excel in areas that drive success.

With Peoplebox Platform, You can implement compensation strategy based on competency and performance very easily. More than 500+ companies such as HackerRank, Disney & Postman are using Peoplebox to drive better business impact.

Peoplebox.ai is your one-stop strategy execution & performance management platform that aligns OKRs, individual goals, performance reviews, compensation, feedback, 1:1s and incentive management – all in one app.You can check out our product tour below. Make sure to visit us!

FAQs

What is the hay system?

The Hay System, developed by Edward N. Hay in the mid-20th century, is a job performance evaluation method widely used globally. It provides a structured and data-driven approach to performance evaluation by determining the relative worth of different jobs within an organization. This system is particularly relevant in Human Resource Management (HRM) as it helps HR leaders evaluate jobs and determine salaries. It is a comprehensive approach that takes into account the complexity and demands of different roles, ensuring fair and equitable compensation.

What is the hay method of job grading? 

The Hay Method of job grading is a proprietary job evaluation system where a job is evaluated by considering the knowledge required to perform the job, the type of problem-solving skills needed for common job challenges, and the assigned responsibilities or accountabilities. This method helps in deciding how much to pay people for their work. It is a systematic approach that ensures fairness and transparency in compensation, helping to attract, retain, and motivate employees.

What are the factors of the hay system? 

The Hay System evaluates a job based on three fundamental factors: Knowledge, Problem Solving, and Accountability. Each factor includes two to three sub-factors. For instance, Accountability measures the type and level of value a particular job can add and has three dimensions: Freedom to act, Nature of the Job’s impact on organizational results, and Magnitude of impact. These factors provide a comprehensive understanding of a job’s value, ensuring that compensation is aligned with the job’s demands and contributions.