Person-Based Structures

The majority of applications of skill-based pay have been in manufacturing. An advantage of a skill-based plan is that people can be deployed in a way that better matches the flow of work, thus avoiding bottlenecks as well as idle hands. Skill-based structures link pay to the depth or breadth of the skills, abilities, and knowledge a person acquires that are relevant to the work. The wage attaches to the person. In contrast, a job-based plan pays employees for the job to which they are assigned, regardless of the skills they possess. Employees in a multiskill system earn pay increases by acquiring new knowledge, but the knowledge is specific to a range of related jobs. Pay increases come with certification of new skills, rather than with job assignments. Employees can then be assigned to any of the jobs for which they are certified, based on the flow of work. The skills on which to base a structure need to be directly related to the organization’s objectives and strategy. One of the main advantages of a skill-based plan is that it facilitates matching people to a changing work flow. Employees like the potential of higher pay that comes with learning. And by encouraging employees to take charge of their own development, skill-based plans may give them more control over their work lives. The fluid work assignments that skill-based plans permit encourage employees to take responsibility for the complete work process and its results, with less direction from supervisors. Person-based plans have the potential to clarify new standards and behavioral expectations.