The distinction
A skill is a discrete capability a person can apply — writing SQL, running a retrospective, negotiating a contract. A competency is a pattern of behaviour that shows up across situations — judgement, ownership, the habit of surfacing a risk while it is still cheap. Skills are what someone can do; competencies are how they go about it.
The two are often used interchangeably in job adverts, and it rarely causes harm there. It causes real harm inside an assessment system, because the two demand different evidence and mixing them produces a framework that can be measured in one half and only guessed at in the other.
Why they are assessed differently
A skill can be tested directly. Five questions pitched at a defined level will separate people who can do the thing from people who can describe it, and the result is repeatable — the same test next quarter measures the same standard.
A competency cannot be tested that way. There is no five-question quiz for ownership. It is assessed from accumulated evidence, by people who have watched the person work, against written descriptions of observable behaviour. That is slower, less precise, and unavoidable.
Which to use for what
Use skills for anything that needs to be counted: capability planning, gap analysis, staffing a project, deciding whether the team can take on work that needs a capability nobody has verified. Skills data supports those questions because it is comparable across people.
Use competencies for progression, role definition and the conversations about readiness that come before a promotion. Trying to run capability planning off competencies produces vagueness; trying to run promotion decisions off skills alone produces technically strong people in roles they are not ready for.