Rethinking Pay: Why Skills-Based Compensation is on the Rise

As industries evolve at lightning speed, many organisations are finding that traditional pay models — based solely on seniority or title — no longer meet the mark.?

Enter skills-based pay: a forward-thinking compensation model that rewards employees for the competencies that drive real company success, rather than the job title they hold. Unlike conventional models focused on seniority and role, skills-based pay directly links compensation to skills that align with business goals.?

The payoff??

Feedback from skills-based organisations points to major benefits. Deloitte survey research shows that skills-based organisations are not only 63% more likely to achieve their goals, but they’re also 98% more likely to retain top performers. By incentivising skill development, companies cultivate a culture of continuous learning, strengthening their adaptability in a rapidly changing market.

But implementing skills-based pay successfully demands a clear roadmap. Start by identifying skills critical to your strategy, integrating them into job roles and pay bands, and setting measurable criteria for pay increases. Just as important is establishing an ongoing development culture, offering resources to help employees track their progress and understand how their growth affects their compensation.

Future-proofing your organisation isn’t just about hiring for today’s needs. It’s instrumental in building a workforce that’s ready for tomorrow. Skills-based pay, when aligned with business goals, positions companies to stay competitive and resilient — no matter what the future brings.

Learn how to adopt a skills-based pay model in our latest article: Skills-based Pay Is On The Rise. Should You Consider It?

What We’re Writing

• How Companies Get Job Architecture Wrong

We explore common pitfalls in job architecture design, and explain how companies can create a structure that truly aligns roles, skills, and career growth with business goals.

• Do Pay Equity Lawsuits Happen? Insights and Lessons From Recent Cases

We highlight key lessons from recent pay equity lawsuits, revealing practical steps companies can take to minimize legal risks and promote fair pay practices.

What We’re Reading

• Tackling Labour and Skills Shortages in the EU

The EU outlines strategies to address labor and skills shortages, focusing on attracting talent, upskilling workers, and enhancing job market resilience across member states.

• Two Thirds of Organisations Report ‘Worrying’ Skills Shortages, Research Finds

New research reveals that two-thirds of organizations face significant skills shortages, underscoring an urgent need for strategic workforce planning and targeted upskilling initiatives.

Webinar: Achieving Pay Equity: Connecting the Data Dots

What’s holding organizations back from achieving true pay equity?

The answer lies in the data — data that is often locked away in incompatible systems, scattered across thousands of points, and too complex to piece together into a meaningful narrative.?

Don’t let fragmented data hold you back from achieving pay equity.

Join Michelle Dervan , Lydia Wu , and Eric Reyhle for a panel discussion on November 6, 2024, to learn how to break through data silos and reveal the true story of pay equity in your organization.

During the webinar, you’ll learn how to:

• Collect and integrate key data from payroll, performance reviews, and HR systems.
• Implement tools and strategies for visualizing pay equity and identifying hidden disparities.
• Streamline reporting by connecting multiple data sources into a single, easy-to-understand dashboard.

Make sure your organization is ready to meet the demands of pay equity reporting.

Checklist: Prepare Your Business for the EU Pay Transparency Directive

Are you ready to take the first steps towards aligning your business with the EU Pay Transparency Directive? We’ve assembled a checklist to help you determine what to prioritize in your business.

Download our comprehensive checklist to learn how to:

• Assess your organization’s readiness to comply with the new pay reporting obligations.
• Identify potential pay gaps and address compliance risks before the 2026 deadline.
• Handle internal information requests and reporting requirements.
• Prepare Your HR team to implement pay transparency across the board.

Assess your readiness for the EU Pay Transparency Directive.

About This Newsletter

With the EU Pay Transparency Directive coming into effect in 2026, companies must confront pay gap issues directly.

The truth is, pay gaps aren’t only about unequal pay for equal work — they often stem from imbalances in representation across leadership and high-paying roles. These are complex problems, but they are solvable.

Each week, Closing the Gap(s) delivers data, tools, and real-world examples of the people and organisations making meaningful progress in closing pay gaps for good. From gender and race to disability, age, and sexual orientation, we explore what’s working to address pay and representation across the board.

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