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Faced with continuing competitive pressures over the past few decades, organizations have been driven to seek more innovative approaches to management. In the compensation management area, skill-based pay (SBP) is one such innovative approach that is being increasingly applied. However, there is a paucity of research on this approach to pay and the consequences of applying it relative to the more traditional job-based approach to pay. This study examines how SBP affects employees' perceptions of their employment relationship with particular focus on organizational commitment and role orientation.