Knowledge-based pay is a reward system that rewards employees for what they know. Rather than their position, employees’ pay is based on their knowledge of their specific processes and procedures. The benefits of Knowledge-Based Pay are an increase in accuracy, consistency, and quality for all aspects of work performed.
A job-based pay rewards an employee based on the job role, while a knowledge-based pay rewards based on the knowledge of an employee. For example, there are two employees in a company. A has a PhD; B is a graduate. But B works as the manager of A and earns more because the company follows a role-based pay rather than a knowledge-based pay. However, there are a few companies who reward employees for learning more about the industry and brushing up their knowledge.
Knowledge based pay is suitable for some roles, where knowledge is key to driving the company forward, and it has many benefits –
Knowledge based reward system compensates an employee for learning a new skill required for the job.
Knowledge based pay is also known as competency-based pay.
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