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Fojt (4) observes that skill-based pay systems are gaining popularity in companies today because they are based on measure of inputs and also provide a direct link between the acquirement, development and efficient utilization of skills, proficiencies and the person’s pay.
The firs advantage of skill based pay system is there is an enhanced ability to center personnel on problem areas. This will in turn avoid time wasting and idling around while thinking that someone will come to fix it for you (Fojt, 4). There is also flexibility in the work force and position coverage where present members can step in for a short while to help short time absentees.
Secondly, due to greater skills, the organization can adapt to technological changes rapidly and first. There also will be improved participation in creation of solutions due to the wider viewpoint on the total work flow (Fojt, 4).
Fojt (5) asserts that due to integration of specialized functions, the levels of staffing will generally reduce to suit into team skill requisites like supervision, quality and maintenance. Other advantages include: increased productivity, enhanced abilities of self-management and greater commitment to goals and objectives of the organization.
The first disadvantage of skill based pay system is that there is a higher rate of individual pay. Higher levels of skills sometimes command a greater wages in the market and this is one of the realities employees have to deal with (Fojt, 4).
There is an additional cost of both time and money due to training for instructors and learners. Other areas which require additional expenses are program design, administration, materials, errors as a result of multiple learning curves and foregone production.
Administrative complexity is often encountered in skilled based pay systems other than complexity involved in tracking evaluation and training and completion dates (Fojt, 5). On addition to this, it is difficult to identify comparable jobs and rates of wages with other potential employers.
Fojt (7) states other disadvantages as individual reluctant to learn, some people gain learning to attain pay increment other than minding about the real competence. Lastly, it is difficult to manage rotations in the work groups to ensure cross training and to refresh skills.