What Is Skill-Based Pay?

Skill-based pay consists of taking into account the knowledge and know-how of employees in order to determine their overall financial compensation.

How to Implement Skill-Based Pay?

A company wishing to set up a skill-based pay should generally:

  • Define current and future needs for each position within the organization.
  • Set up career paths that take into account the skills to have.
  • Assess employee skills to identify gaps.
  • Provide more skills development opportunities.
  • Draw up skills development plans.
  • Determine strategies to make compensation fair according to the different skills.
  • Present the new compensation policy to employees.

What Are the Advantages of Skill-Based Pay?

Benefits of skill-based pay include:

What Are the Disadvantages of Skill-Based Pay?

The disadvantages of skill-based pay include:

  • Increase conflicts between team members.
  • Encourage employees to develop several skills without necessarily becoming subject matter experts.
  • Increase fixed compensation costs.
  • Create a very competitive work environment.

What Is the Difference Between Behavioral Skills and Technical Skills?

The behavioral skills refer to employee soft skills such as communication, teamwork, creativity, or innovation. These are attitudes or behaviors that allow employees to perform their tasks effectively.

The technical skills, they refer to the knowledge and know-how of employees such as mastery of specialized software, writing skills, or specialized health knowledge. It is knowledge that allows employees to perform adequately.

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