What is Knowledge-Based Pay?

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.

Difference between Job- based pay and Knowledge- based pay

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.

Benefits of Knowledge- based pay

Knowledge based pay is suitable for some roles, where knowledge is key to driving the company forward, and it has many benefits –

• Employees have increased motivation because they know they are paid fairly.
• Employees work harder and learn better when companies incentivize learning.
• Knowledge based pay forms a dedicated workforce that wants to learn and grow.

FAQs

What is a knowledge-based reward system?

Knowledge based reward system compensates an employee for learning a new skill required for the job.

What is knowledge based pay also known as?

Knowledge based pay is also known as competency-based pay.