The transition from seniority-based to skills-based compensation and promotion frameworks represents a fundamental shift in how organizations evaluate, reward, and develop their workforce. This chapter examines the legal, ethical, and operational complexities accompanying this transformation, emphasizing evolving labor regulations, antidiscrimination standards, and technological advancements in talent assessment. It analyzes the limitations of traditional seniority systems, the drivers of skills-centered models, and the emerging legal challenges tied to competency evaluation, algorithmic decision-making, and transparency requirements. The chapter further explores implications for collective bargaining, organizational change management, and future-oriented policy reforms. By integrating human capital theory, labor law, and contemporary HRM practices, it provides a comprehensive foundation for designing equitable, compliant, and future-ready compensation and promotion systems suited to dynamic labor markets.