"Pay-for-Knowledge and Pay-for-Skills compensation systems give employees higher pay as an incentive for each new skill or job they learn" (Werther & Davis).
Since "pay-for-knowledge" is a new concept, employers should use the PFK Compensation System as an enhancement to their current compensation programs. Companies and organizations should encourage their employees to learn as much as they can about their career by compensating them for learning new skills about their job and the company. Paying employees based on job knowledge is not necessarily for the task he is assigned to, but it is based on what he learns to enhance more skills and knowledge of additional tasks. When an employee learns all he can about his job and the company, he becomes a part of the organization. This will help to hire, maintain, and retain employees who will be a contributing factor to the mission and goals of the organization.
Paying employees for knowledge and job skills will benefit not only the employee, but the employer as well. The more organizations encourage their employees to enhance their skills as an employee, the greater morale, turnover, absenteeism, and productivity will improve. It will be interesting to see how the future for Pay-for-Knowledge will be as more research is done to determine the reliability and validity of the PKF compensation plan. A few companies who have implemented a "Pay-for-Knowledge" plan are GE, Polaroid, Steelcase, IBM, and Westinghouse.
According to a research study done by The Compensation & Benefits Review, Septmber, 1994 Magazine (EBSCO Host File "Does Paying for Knowledge Pay Off?") there are pros and cons to the pay-for-knowledge system. However, considering this is a new concept in the compensation management field, there is not as much information available to fully support PFK claims. The magazine did a study based on two companies, one of which was a pay-for-knowledge system and the other was a non-pay-for-knowledge system. They measured labor productivity, product quality, absenteeism, accident rates, and voluntary turnover. They found that a pay-for-knowledge plan may contribute to increased product quality and decreased accident rates. Productivity was lower in the PFK facility, however, they felt the validity of productivity may have been influenced by other factors.
Since the Pay-for-Knowledge compensation plan is a newer concept, there are a number of consulting services that have begun training and assisting in pay-for-knowledge plans. The Quorum Group cautions employers to not begin a pay-for-skills plan if the existing compensation plan is not a reliable one. The Quorum Group also specializes in human resource consulting regarding a number of personnel issues.
[The Quorum Group "Pay-For-Skills"]
[Pay-For-Knowledge and Work Re-organization in a High-Performance Firm]
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