What is Competency Based Pay?

An organization that uses competency-based pay structures compensates employees based on their obtained skills and competencies in the workplace, compared to traditional pay structures, which compensate employees based on job title, seniority, or position. This approach encourages employees to improve their skills and knowledge. It is usually used in fields that require specialized knowledge. 

As an example, you might have an accountant with over 25 years of experience within the organization who prepares and maintains financial reports. Another employee with five years of experience performs the same duties. These two employees are paid the same amount, as the competencies required are the same