How talent intelligence helps roll out a pay-for-skills rewards strategy

Learn why finding and rewarding the talent you need based on their skill sets is a winning approach for everyone.

How talent intelligence helps roll out a pay-for-skills rewards strategy

Three years after the pandemic started, many organizations are still in the midst of disruption. With today’s top challenges — including shifts in the labor market, new technologies, and skills shortages — many still need a better way to engage talent.

It’s times like these that should make organizations consider a skills-based approach to talent acquisition and management. But while many are aware of why they need a skills-based approach, few know how to put one into practice. In fact, many are unsure where to even start. 

A key part of any organization’s skills-based talent transformation is how rewards can — and should — be implemented to support your strategy. 

History has shown that the right rewards can boost any talent strategy. In the 1980s, pay incentives, like bonuses and profit-sharing, were introduced as more workers began to move from company to company, increasing the importance of competitive reward programs. By the early 2000s, pay for performance continued to be the primary rewards model, but the importance of internal equity and supporting career development began to grow. 

Today, organizations must identify and invest in the right skills — and reward proficiency and development in their employees. In this webinar with Mercer, we talk about how a data-driven approach to pay for skills could be the key to attracting and retaining top talent. Here are the highlights from that conversation on why it might be time to consider a pay-for-skills approach.

Related content: Watch the entire pay-for-skills rewards conversation with Eightfold AI and Mercer. 

Why you need a pay-for-skills approach

Why are more organizations linking rewards to skills? Peter Stevenson, who leads Mercer’s go-to-market strategy for skills-based products, shared results from their Skills Snapshot survey. The data revealed that the top reason is to attract and retain premium skills. Nearly 50% of the organizations that responded are incentivizing skills development and career progression. 

Organizations exploring the business case for a pay-for-skills approach just need to look at the data. Eightfold VP of Product Management, Hicham Zahr, explained the power of talent intelligence with AI to help organizations extract skills based on industry trends and insights. Data showing the fastest-rising and fastest-declining skills, common skills, adjacent skills, and additional talent insights can help organizations place a concrete value on the most important skills for them.

Once organizations are aware of the skills that can help them achieve their business goals, they can look for talent — both externally and internally — with those skills. They can also develop skills-based rewards linked to strategic goals, and incentivize and recognize ongoing development of those skills once talent is on board. 

Related content: Read Mercer’s Global Talent Trends report 2022-2023.

How talent intelligence helps roll out a pay-for-skills rewards strategy

Putting a pay-for-skills plan into action

Before organizations invest in pay-for-skills rewards, they need to answer the big question: What skills are business critical? 

Business-critical skills are important, even essential, to the organization’s overall success. In-demand skills tend to go hand in hand with top talent, and acquiring them often involves offering competitive pay. 

This is where talent data becomes crucial. Business and talent leaders can see which skills are driving value across the organization, even outside of specific jobs and roles. It’s important to look at skills in the context of different work constructs rather than being tied to a job description. It’s about identifying specific skills that you want to find, reward, and grow within your talent pool. 

Once organizational leaders identify the skills they need, they need to benchmark the value of those skills by reviewing salary ranges, skilled allowances, or factoring skills-based pay differentials. Brian Fisher, who is Mercer’s leader for skills solutions, mentioned their Skills Pricer tool as an example of technology that uses machine learning to assign monetary value to skills. 

But skills analysis is not just about recruiting, retention, and redeployment — there’s a bigger transformation happening. Analyzing the skills you need is also about redesigning and reengineering jobs and roles around the work at hand. There’s a correlation between the work that needs to be done, talent models, and pay-for-skills rewards.

Related content: Read our research report “Beyond the résumé: Building a workforce with a skills-based approach.”

How to deliver pay-for-skills rewards

The pandemic accelerated the transition to more flexible work environments. As a result, more organizations adopted agile talent models, yet the majority of employers today are still managing talent in fixed roles that include tasks that align to static job descriptions. 

To be truly agile, organizations should continue their transformation to include more flexibility in roles. People’s contributions should align with their skill sets, allowing them to work on projects or gigs throughout an organization dependent on needs, not a static role. 

With this new approach to work, organizations can take a different approach to rewards. That doesn’t mean an organization has to completely revamp talent management and move all job descriptions over to skill-based jobs. Creating and putting a pay-for-skills based plan into action is a multistep process. 

  1. Determine where your organization is along the pay-for-skills rewards journey. Your approach doesn’t have to be revolutionary — you can start small and evolve with your needs.
  2. Many Eightfold customers start with our Job Intelligence Engine to define relevant skills for every organizational role. This allows you to design roles using skills stored in a “role library,” so everyone across the organization begins from the same starting point. 
  3. Start this process for new hires and go from there, or begin with a specific department or organization. This is what we call “role calibration,” where organizations can calibrate roles in real time using AI for skills-based insights and market-informed sourcing strategies.
  4. Once groundwork is done, tie in the employee experience to inform the career-planning capability. Career navigation using skills as a compass helps encourage personal development and support organizational alignment. This empowers people to have more visibility and control over their careers, and helps managers have more fruitful and supportive conversations with their people. 
  5. Incorporate skills assessments, either on the front end for talent acquisition, or in the employee development cycle for talent management. Consistent skills assessments can also inform succession planning by looking at skills-based role readiness. It identifies employees ready for leadership roles by looking at their current and adjacent skills, and helps monitor and keep track of emerging skills by taking a more frequent and deeper look into the organization.

AI-powered talent intelligence can provide the insights organizations need to decide which strategy — build, buy, or borrow — is right for them. It helps determine what skills to invest in to drive the business forward, and what skills they may want to borrow through contractors or contingent workers. 

This is an exciting time to lead and manage workforce strategies. Pay-for-skills rewards is one of the latest innovative steps toward becoming a skills-based organization — and one that can be easily implemented with the help of AI-powered talent intelligence and talent insights. 

Watch the webinar with Eightfold AI and Mercer “The potential of pay for skills: Future-proofing your workforce” on demand now. 


Jason Cerrato is the Senior Director of Product Marketing at Eightfold AI. Before joining Eightfold, he was an HCM industry analyst with Gartner and held talent leadership positions at United Technologies for over a decade. Cerrato is the co-host of The New Talent Code, a podcast by Eightfold AI.

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