Final answer:
Skill-based pay is a compensation system that rewards employees based on their individual skills and knowledge. It encourages employees to continuously develop their skills and improves performance.
Step-by-step explanation:
Skill-based pay is a compensation system in which employees are paid based on their individual skills, knowledge, and abilities. It is popular because it effectively increases the payment received for work. Instead of a traditional pay structure where employees receive a fixed salary, skill-based pay allows employees to earn more as they acquire new skills and become more valuable to the organization.
For example, let's say a company has a skill-based pay system in place. An employee starts with a base salary, but as they gain new skills or certifications, their pay increases. This incentivizes employees to continually develop their skills and improve their performance.
Skill-based pay can also be beneficial for employers. It helps attract and retain talented employees, as they see the opportunity for increased pay based on their performance and development. Additionally, it encourages a culture of continuous learning and improvement within the organization.