| Skill-based pay is an alternative to job-based pay. | | | | the needs of ambitious employees who confront |
| Rather than having an individual's job title define | | | | minimal advancement opportunities. These people |
| his or her pay category, skill-based pay (or also | | | | can increase their earnings and knowledge without |
| sometimes called competency-based pay) sets | | | | a promotion in job title. Finally, skill-based pay |
| pay levels on the basis of how many skills | | | | appears to lead to performance improvements. A |
| employees have or how many jobs they can do. | | | | broad-based survey of Fortune 1000 firms found |
| What's the appeal of skill-based pay plans? From | | | | that 50 percent of those with pay(based on skills) |
| management's perspective, its appeal is its | | | | plans rated their plans as successful or very |
| flexibility. Filling staffing needs is easier to do when | | | | successful increasing organizational performance, |
| employee skills are interchangeable. This is | | | | whole only 6 percent considered then |
| particularly true today, as many organizations cut | | | | unsuccessful or very successful. |
| the size of their workforce. Downsized | | | | What about the downside of skill-base pay? |
| organizations require more generalists and fewer | | | | People can "top out"_ learning all the skills the |
| specialists. While pay based on skill encourages | | | | program calls for them to learn. This can frustrate |
| employee to acquire a boarder range of skills, | | | | employees after they have become challenged by |
| there are also other benefits. It facilitates | | | | an environment of learning, growth, and continual |
| communication across the organization because | | | | pay raises. Skills can become obsolete. When this |
| people gain a better understanding of others' jobs; | | | | happens, what should management do? Cut |
| it lessens dysfunctional "protection of territory" | | | | employee pay or continue to pay for skills that |
| behavior. Where pay based on skills exists, you | | | | are no longer relevant? There is also the problem |
| are less likely to hear the phrase. "It's not my | | | | created by paying people for acquiring skills for |
| job." Pay )based on skills)additionally helps meet | | | | which there may be no immediate need. |