Reshaping Your Organization Using a Skill-based Reward Structure | Deloitte US

Talent Management

As organizations shift increasingly toward skills-based talent management, they must consider the impact on various talent practices traditionally built on jobs/roles, such as pay and rewards structure. As noted in this article, “in a traditional reward framework (see Figure 1), a worker’s job title drives their base pay while company and individual performance primarily drive incentive pay. To achieve an increase in base pay, workers must meet the job, skills, and competency criteria for the next level job in their career path and typically receive that pay increase after an annual performance cycle. However, this traditional reward framework is not responsive to how workers will be expected to gain and demonstrate skills in a skills-based organization. To overcome this challenge, Figure 2 shows a Skills-Based Rewards (SBRs) model in which a worker’s base pay comprises both a 1) core salary, which all workers of the same level earn, and a 2) skills salary defined by a worker’s demonstrated proficiency in each skill. This model allows the skills salary portion of employees’ compensation to change as they acquire and demonstrate new skills relative to the value the organization places on those skills. While this is an interesting idea, it can be very challenging to implement, especially considering survey results by the Institute for Corporate Productivity (i4cp) that show many organizations do not even have a skills taxonomy or common language for identifying and understanding the skills of their workforce. The Deloitte article shares a few ideas for overcoming the barriers to skills-based rewards.