This is when an employee’s salary is determined by their skills or competencies, rather than at a universal rate. This may persuade more skilled applicants to apply, and incentivise up-skilling within the workforce.

Many employees benefit from this type of salary and this is because they actually get paid a salary based on their competency and expertise; compared to the traditional salary in which regardless of the expertise, each employee receives a fixed salary. Some may however argue that a competency-based salary is difficult come by some organisations do not have the finances to offer such, therefore an employee may deserve a higher salary, but due to the lack of finances, the employer will just offer a fixed salary which does not reflect their competency