Pay for Knowledge and Pay for Performance

Pay for Knowledge and Pay for Performance

Introduction

In business world there are two types of pay systems and both of them have got their own characteristics. Both the pay scales are discussed below.

Discussion

Pay for Knowledge

In simple words the Pay for Knowledge term is used when the labor or employee is actually paid for his knowledge (www.home.snc.edu). Pay for knowledge has some other names too such as knowledge-based pay, skill based compensation and multi skill compensation (Jenkins & Gupta, 1985; Lawler & Ledford, 1984). The Pay for Knowledge has further two types. The first of pay for knowledge is multi skill based pay systems. In this system the pay level is linked to the number of skills an individual learns. This kind of pay system is more suited production workers. The second type of pay for knowledge is known as increased knowledge based pay system. In this kind of pay the pay levels are linked with the increase in knowledge of relevant field in which the labor is working. This kind of pay system is more suited for mechanics and skilled trade employees. At a later stage after the proposal of this theory new dimension was added to it when Lawrel and Ledford presented a theory categorizing skill development in three categories. The first category was Vertical Skill Acquisition. A suitable example can be of a skilled labor or worker who could gain expertise in Management skills. Another type is of Horizontal Skill Acquisition. This is similar to multi skilled system. An example can be when a personnel director learns accounting. The third type is named as Depth Skill Acquisition. This is similar to Increased Knowledge Based system. In this type a worker or labor gains more and more knowledge regarding his field and gets able to work in more depth in his relevant field.

If we consider the era of today's knowledge based economy, where continuous learning and the dire need of contemporary knowledge is the highest priority of an individual or of an organization, we could easily say that the pay for knowledge compensation has gained a momentum like never before and it has also received an ever increasing rate of attention as well as priority. A major reason for the rise in the concept of par for knowledge is because the old jobs are getting obsolete and new class of jobs is rising. For instance the rise of new jobs in field of Information Technology and Business Information System etc. More over the structures of businesses are changing which require more of the knowledgeable people, especially at the top level of management. So they give importance and prioritize to this new system. This priority can be found across all types of institutions and organizations, especially those, working in a highly competitive market. But specially worthwhile to mention some types of organizations such as a business organization having the Research and development department and the National and International Universities spending on Research and ...