Organizations usually begin the process of designing a wave structure by determining their job structure. Two often-cited principles of compensation are
(1) equal pay for equal work and
(2) more pay for more important work. Both imply that organizations pay employees for contributions required by jobs.
Most organizations utilize job assignment as a major determinant of employee contributions. A formal wage structure, defined as a rate or range of rates established for job classifications, seems to be standard organization practice, except in very small organizations. Formal job evaluation or informal comparison of job content is the almost universal base of pay rates.
Job evaluation is concerned with jobs, not people. A job is a grouping of work tasks. It is an arbitrary concept requiring careful definition in the organization. Job evaluation determines the relative position of the job in the organization hierarchy. It is assumed that as long as job content remains unchanged, it may be performed by individuals of varying ability and proficiency.