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Skill-based pay, in reality, is difficult to design, does not fit all

situations, and involves a time-consuming process of constructing skill
blocks, mapping pay progressions, and assigning dollar values to each skill.
It works best when built on a broad base of skills in a stable bu expanding
work environments.65 Its major advantage for employers is that it can be used
to replace annual raises. Under the skill-based system, no one gets a raise,
even when promoted, until he or she has demonstrated proficiency with new
skills. Think about it. You could in theory get a promotion but use the same
skills you already used on your other job. In that case, no raise would be
forthcoming. Variations on the skill-ba cd approach are used according to the
type of skills required.
Knowledge-based pay is defined as a variation that rewards employees for
acquiring additional knowledge both within the current job category and in new
job categories. This innovation is most aptly illustrated by trying to stretch
the skill- based model to professionals, managers, and some technical
personnel.66 A study compared two manufacturing plants in the same
corporation. One used the traditional job-centered pay design; the other used
a knowledge-based design. After 10 months, the facility using pay for
knowledge had significantly higher quality and significantly lower absenteeism
and accidents. However, the traditional plant had higher productivity.
Credential-based pay rests on the fact that the individual must have a diploma
or license or must pass one or more examinations from a third party
professional or regulatory agency. For example, a lawyer must be a member of
the state bar association, and a medical doctor must have passed state
licensing exams. Credential- based pay is much more cut-and-dried than skillbased or knowledge-based pay.
Feedback pay is based on aligning pay with strategic business objectives and
then establishing a direct connection between the jobholder and his or her
part in accomplishing these goals. This design must conform to four
principles: (1) it flows directly from the organizations strategic business
goals, (2) it directly links employees actions to these goals, (3) it
provides sufficient opportunity for rewards to hold employees attention, and
(4) it is timely.67 Many major companies like Gen