A relatively inflexible compensation system is, which determines the value of the jobs employees hold rather than paying individuals for the capabilities they bring to the organization.

This type of compensation system is called job-based pay.

This model of compensation determines how much the employee would get paid according to the tasks that the employee has to do. Pay raise in this type of compensation model would be determined by work tenure.

An alternative to this model is called knowledge-based compensation or person-based pay. In this approach, the individual receives compensation based on the skills and knowledge that person has to do the job. Thus, the more competent you are in the type of tasks you need to do, the higher the pay you will receive.