Which compensation strategy could encourage skill development among employees?

Competence-based pay is a compensation strategy that directly links employee wages to their skills, knowledge, and competencies. This method encourages employees to develop their skills and enhance their capabilities because the more competencies they acquire, the higher their potential earnings. By rewarding employees for their level of expertise and their ability to perform various tasks, organizations foster an environment where continuous learning and skill development are valued. This approach not only motivates employees to improve their skill sets but can also lead to a more versatile and capable workforce.

In contrast, broadbanding typically consolidates pay grades into fewer categories, which can limit the direct link between compensation and individual skill development. Hourly pay is generally based on time worked rather than skills, so it does not inherently promote skill enhancement. Pay secrecy can stifle open discussions about compensation, potentially reducing motivation for skill development if employees are not aware of the benefits associated with increasing their competencies.