This paper focuses on competence-based assessment (CBA) of the subject Basic Interior Decorations (BID) implemented in Malaysian secondary schools and its influence on student engagement and the impact on employability. A mixed-method approach was employed across all 19 schools in the country offering the subject of BID, resulting in 320 completed student questionnaires and 19 assessor questionnaires, 76 student interviews and 19 assessor interviews, 93 observations and 190 student portfolio reviews. One of the main outcomes of the study was the development of student engagement through the BID tasks. The three-fold operational engagement identified in the study involved students’ behaviour, emotion and cognition which appeared to prepare them with some necessary and relevant aspects of employability. Students demonstrated positive conduct by following all the health and safety rules in the workplace, actively involved in the teaching and learning process and also participated in other school-related activities; all of which denoted the behavioural engagement. They were happy in the BID class and had good relationships with their teachers and friends, indicating their affective reactions in the classroom. Furthermore, they developed the sense of belonging to the school as they appreciated success in school-related outcomes and retained the values of interest, attainment, utility and cost. Both students’ affective reactions and their identification with school portrayed the emotional engagement. In addition, students displayed great desire in investing in learning by taking up challenging tasks and persistently working on them till finished, besides applying self-regulation through monitoring and evaluation of their own work. The psychological investment in learning and the inner psychological quality such as self-regulation inevitably became the evidence for cognitive engagement. Student engagement is further discussed in relation to the concept of employability which could be of interest to academics, assessors and professionals in developing competency standards in their respective assessments.