The article provides a rationale for the use of the competence approach in the framework of the tariff wage system for the formation of the basic part of the salary of industrial worforce. The forms of remuneration based on the competence approach are considered. The use of the competence approach as the most effective instrument of remuneration aimed at increasing labor productivity is argued. The analysis of the flaws and particular qualities of the use of time-based forms of remuneration at industrial enterprises in modern economic conditions. In order to increase labor productivity, a set of measures has been formed, aimed at improving the remuneration system of production and industrial personnel. A mechanism has been developed for integrating the variable part, which is based on the results of the employee’s assessment, and the basic part of the salary. Improving the remuneration system based on the competence-based approach contributes to achieving an equitable distribution of remuneration for work, due to the consideration of the individual level of competence, ensures the growth of labor productivity, contributes to the development of the organization’s intellectual capital.