Compensation refers to payments, such as salaries, wages and bonuses, that reward employees for their job-related performance. Job-based compensation structure, or job-based pay, is the most traditional type of compensation system in which pay is set on the basis of the job itself. Employees are remunerated on the basis of the jobs they are currently performing. Job-based compensation is in contrast to skill-based pay, which awards employees on the basis of their skill and knowledge level. Job-based compensation structure has several advantages despite being touted as an outdated compensation structure.