WEEK FOUR: Chapter 6
Skill-Based Pay Structures
Link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires
that is relevant to the work
pay individuals for all the relevant skills for which they have been certified regardless of
whether the work they are doing requires all or just a few of those particular skill
very different approach compared to a job-based plan, which pays employees for the job
to which they are assigned, regardless of the skills they possess
Purpose of the Skill-Based Structure
support the strategy
support work flow
fair to employees
motivate behaviour toward organizational objectives
Types of Skill-Based Plans
Pay is based on knowledge of the person doing the job, rather than on job content or
Basic responsibilities do not vary on a day-to-day basis.
Generalist / Multiskill Based: Breadth
Earn pay increases by acquiring new knowledge.
Assigned to jobs based on certification and work flow.
Responsibilities can change over a short time.
A systematic process to identify and collect information about skills required to perform
work in an organization
What information to collect?
o Specific information on every aspect of the production process.
Establish methods to determine and certify skills
o Peer review, on-the-job demonstrations, or tests.
o Scheduled fixed review points and recertification.
Whom to involve?
o Employees and managers.
Outcomes of Skill-Based Plans
Well accepted by employees.
o Provide strong motivation for individuals to increase their skills.
Become increasingly expensive.
A plans success is determined by how well it aligns with the organizations strategy.
May fit better in a firm with low labor costs.
Jack-of-all-trades? Or master of none?