KNOWLEDGE BASED PAY
It is defined as the compensation predicated upon an employee’s level of skill and educational attainment. Knowledge-based pay can be an incentive for employees to acquire additional training and education, thus upgrading overall work force skills. Pay-for-learning programs, also known as pay-for-knowledge, skill-based compensation, knowledge-based pay, or pay-for-skill programs can be defined as follows: Pay-for-learning structures link pay to depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to the work. Structures based on skill pay individuals for all the skills for which they have been certified regardless of whether the work they are doing requires all or just a few of those particular skills. Simply put, pay-for-learning programs compensate employees for knowledge and skills that they posses, not for the job in which they are performing.
The critical processes to determine a skill-based structure should include the following steps. An organization must make sure that there pay-for-learning structure is:
- Internally aligned with work relationships within the organization, perform a
- Skill analysis: a systematic process to identify and collect information about skills required to perform work in an organization, select
- Skill blocks,
- Skill certification, and,
- Skill based structure. Skill analysis decisions also include: what is the objective of the plan, what information should be collected, what methods should be used to determine and certify skills, who should be involved, and how useful are the results for pay purposes. Upon answering these questions in their respective order, it is important to remember that skill-based systems focus on inputs, not results. Their success is closely correlated with how well the plan is aligned with an organization‘s strategy. The information that is collected should be very specific information on every aspect of the production process. There are many different methods used to verify certification of skills, some companies use peer review, on-the-job demonstrations, tests, and also completion of formal courses related to certain subject areas. The most important group of people that should be involved in building a skill-based structure, are the employees of an organization. Employee involvement is almost built into skill-based plans, as their opinion in all levels will ensure that they find the pay-for-learning system to be fair.
