What does competency-based pay focus on?

Competency-based pay emphasizes compensation that is directly tied to the employee's skills, knowledge, and performance as they relate to their job requirements. This approach recognizes that the specific competencies an employee possesses can greatly impact their effectiveness and contribution to the organization. By rewarding individuals based on their skills, rather than on factors such as longevity or market rates, organizations can encourage continual professional development and align their pay structure with the competencies that drive success.

This type of pay system motivates employees to enhance their skills and abilities, leading to more effective performance and potentially greater organizational success. It is particularly relevant in professional jobs where specialized knowledge and capabilities define the quality and productivity of work.