What is skill-based pay? What are its advantages and disadvantages?

Question

What will be an ideal response?

Answer 1

Skill-based pay systems are pay structures that set pay according to the employees' level of skill or knowledge and what they are capable of doing. Skill-based pay is desirable in situations where employees need to learn more skills and become more flexible in the jobs they perform, particularly in environments where the technology is changing.

Skill-based pay has its advantages. It helps organizations become more flexible and innovative. It encourages a climate of learning and adaptability. It helps employees use their knowledge and ideas more productively. It gives employees a broader view of how the organization functions.

Skill-based pay also has its disadvantages. It rewards employees for acquiring skills, but does not provide a way to ensure that employees use their new skills, resulting in the organization paying employees for learning skills that the employer is not benefiting from. Additionally, it does not necessarily provide an alternative to the bureaucracy and paperwork of traditional pay structures. Finally, gathering market data about skill-based pay is difficult because most wage and salary surveys are job-based.