Skill Based Pay

Posted in Human Resource Terms, Total Reads: 6078

Definition: Skill Based Pay

Competency- based pay is when an organization pays for the extent of knowledge and variety of skills possessed by the employee, rather than for the position held by the individual within the company.

It is predominantly of two types – Pay for Knowledge and Skill Based Pay.

In the Pay for Knowledge Pay plans, the employee gets rewarded for acquiring organizationally relevant knowledge.

For example:

Microsoft pays new programmers more as they learn the nuances and intricacies of Windows 7.

Skill-based pay on the other hand is more applicable in the context of manual workers.

For example:

A carpenter gets paid more as he becomes more adept at making and completing storage lockers.

The significant difference in this method compared to the traditional job evaluation-based pay plans are that this is more person-oriented rather than job-oriented and employees build job competencies through experience on the job.

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