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Update on Skill-Based Pay

Most organizations have traditionally designed their compensation systems around specific jobs. The wage and salary structure of these systems has typically been based on job analyses and evaluations; this process determines a job’s worth and salary range. In recent years, however, a new alternative to this job-based approach has been developed ; this new system pays employees for the skills and knowledge they possess, rather than for the job they do or a particular job category. A variety of terms have been used to refer to this new compensation approach: skill-based pay, multiskill-based pay, knowledge-based pay, and pay-for-knowledge. The time has now come to spell out the meanings of and distinctions between these