How Can Skill-Based Pay Boost Manufacturing’s Prospects?

Five employees watching another employee present in front of a whiteboard

Employee compensation is traditionally based on tenure. New hires start at the bottom of the pay scale and earn more as they gain experience — sometimes earning above average if they’ve earned special certifications or accreditations. In theory, the employee with the most seniority would be the most knowledgeable and earn the best pay. But in today’s multifaceted, multigenerational workforce, a tenure-based compensation structure is antiquated.

Skill-based pay offers a different mode of earning for employees — one rooted in their abilities and understanding of the job rather than how long they’ve done it. In a manufacturing future destined for paradigm shifts, job-based pay could easily give way to skill-based pay.

What is skill-based pay?

In skill-based compensation systems, employers base an employee’s salary on their skills, training, certifications, and/or any other useful knowledge. With skill-based pay, a brand-new employee with several certifications could make more than a long-time employee who may not have the same breadth of skill or depth of knowledge.

While this challenges the traditional pay scale model, skill-based pay incentivizes employees to continue learning new skills. An employee who chooses skill-based pay can earn more — as long as they’re willing to put in the extra work for additional training and continuing education.

An engineer pointing at a computer in a factory

The incentive to continue learning

The promise of skill-based pay encourages employees to seek out additional training, education, and certification opportunities. More skilled employees translate to more efficient production and opens possibilities for future company improvement. Skill-based pay also motivates employees to expand their employment horizons — giving them opportunities for higher compensation and a higher-level position.

Skill-based pay ties an employee’s upward mobility to their own skills and motivation for improvement instead of relying on their ability to navigate corporate politics. Employees who wish to pursue the promise of higher pay and better job prospects gain the necessary incentive to keep improving their skills.

How skill-based pay benefits employers

Benefits for employees and employers align under a skill-based compensation system. Since offering skill-based pay incentivizes existing employees to improve their skills, employers can create a culture that promotes job retention and internal upward mobility. This negates the need for long and costly new hire searches and may even attract talent from competitors still operating on traditional pay scales.

Skill-based pay promotes a more flexible workforce with more skill diversity — which translates to expertise in all aspects of production. Experts in a variety of areas means fewer gaps in production processes. Manufacturing companies with a deep bench of highly skilled employees won’t have to worry about delays caused by the departure of a single employee. A culture steeped in incentivized education means there’s always someone capable of stepping up.

Two men shaking hands in a warehouse

Finding the skills to pay the bills

The manufacturing industry hinges on evolving skills and increasing experience. And it’s no secret that manufactures struggle to find employees with the right skills. The skills gap is already prevalent and growing worse. Skill-based pay will encourage more people to seek out the education and training for careers in manufacturing. It’s by no means a cure-all for the manufacturing skills gap, but it is a step in the right direction.

The skills gap continues to be a barrier for manufacturers. If you’re having trouble finding technicians and talent, you can always count on the professionals at Global Electronic Services. Contact us for all your industrial electronic, servo motor, AC and DC motor, hydraulic, and pneumatic needs — and don’t forget to like and follow us on Facebook!
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