This definition categorizes workers based on their company's final product rather than on the actual work the employees perform.
why is it "based on" rather than "basing on"?
I think Tdol's being too kind to the writer. What the writer means is that the categorization is based on..., and the sentence is just sloppily written. I'd say either
This definition categorizes workers according to their company's final product rather than the actual work the employees perform.
We have based the categories used in Table n on the final product of an employee's company rather than on an employee's actual work.