Disadvantages of Skill-Based Pay
Average pay of employees likely higher
Excessive labor costs, if productivity increases don’t offset additional costs
SBP systems require a major investment in training
Notes:
- The average pay of employees is likely to be higher than in a job-based pay system.
- In successful SBP systems, productivity increases offset the additional costs. However, if these gains do not result, an organization could experience excessive labor costs.
- SBP systems are complex and much effort, employee involvement, and communication is necessary to implement them.
- Organizations experienced with job-based pay systems are usually not prepared for the difficulties of getting an SBP system off the ground.
- SBP systems require a major investment in training. This investment is both in direct costs as well as in time devoted to training activities.
- Many organizations are not prepared for continuous training and the scheduling difficulties that are inherent in SBP systems.