The first step in creating a skill-

The first step in creating a skill-based pay program is to identify the skills that deserve Premium pay. The organization then needs to develop assessment procedures to measure each of the skill levels. Finally, training opportunities that focus on relevant job requirements and company objectives need to be provided to facilitate the learning process.Skill-based pay and pay-for-knowledge programs also can be tied to performance, as shown in Exhibit 23. Rather than having just one column of pay rates based on skill level, there are multiple columns, one for each level of performance. This Skill x performance pay matrix communicates to employees that both skill and dependable performance are vitally important to the company. It also illustrates how an employee could advance to a higher skill level, but receive a lower rate of pay due to poor performance.About half of the Fortune 1000 companies offer some form of skill-based pay and these programs are considered quite successful. In a survey of 97 companies with skill-based pay programs, 75 percent thought they had higher productivity and better quality than organizations with traditional compensation system. Most of the companies(69 percent) also thought skill-based pay reduced their overall compensation costs. 4.6.4 Differential PayIn addition to their base pay, employees often receive additional compensation for factors that make work more difficult or unpleasant. These wage differentials are considered an important and essential part of making compensation fair.OvertimeThe Fair Labor Standards Act requires employers to pay time and one-half for hours worked in excess of 40 hours per week. Some employers provide additional overtime payments, such as paying overtime for more than eight hours a day and paying double time for more than ten hours a day or 50 hours a week.