According to Dessler (2008) there are two broad ways of categorizing compensation,
namely; Job-based approach and Skill-based approach. The Job-based approach is the
most traditional and widely used type of compensation plan. According to Gomez et
al. (2012) the plan assumes that jobs are very well defined and titled, for example a
cashier, a matron or a chef. The works in these jobs is done by people who are paid to
perform them well. In this plan since all jobs are not equally important to the firm, the
labour market puts greater value on some jobs than on others with the most important
jobs paying the most. DeNisi and Griffin (2008) refers to this as pay-for-knowledge,
which they describe as compensating employees for learning specific information.
Milkovich et al. (2013) defines job-based approach, as paying an individual for the
jobs they are assigned irrespective of skills they possess.