The application of skill-based pay challenges the traditional logic of pay determination,
which assumes that the firm pays for the job and not the person. Job-based pay considers that
the job itself is the source of value that a firm pays for, independent of the person holding the
job. On the other hand, skill-based pay focuses on the individual employee as the source of value, and in particular, the specific bundle of skills that an individual brings to the employer
becomes the basis for the rate of pay. In other words, the depth and breadth of each
employee’s skills determines the rate of pay. In high-technology firms, the application of
skill-based pay strongly supports the overarching goal of innovation because employees are
given incentives to constantly upgrade their skills and knowledge to keep up with the rapidly
expanding technological environment