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Pros & Cons of Performance-Based Pay

What are the advantages and disadvantages of performance-based pay? Explain why employees in an organization should or should not earn pay based on performance. Performance based is based on sales performance. Thanks

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Employees with performance-based pay are motivated (Jensen, 2012). It is a win-win situation according to Brooks (n.d.) and employees can benefit from the opportunity to work smarter and raise their earnings capacity, while employers benefit from increased productivity and a more engaged workforce.

Richter (2002) agreed that performance pay system retains top performers, align labor costs with productivity and reinforce company objectives.


However, performance-based compensation programs have their drawbacks. It encourages competition among workers rather than collaboration (Solmon and ...

Solution Summary

The solution dissects the advantages and disadvantages of performance-based pay.