Advantages:
- motivating and retaining key talent
- getting unmotivated individuals to improve productivity
Disadvantages:
- the performance of a complex job as a whole is often reduced to a simple, often single measure of performance such as profit, without considering other factors that make up overall performance
- performance related pay can be disadvantageous in that it can create the potential for rifts among employees if they feel they are being treated unfairly or unequally if there are not strict and clear stipulations in place for the system.
- employees may only be inclined to perform work that is measured in their performance appraisal
- employees are not as motivated by monetary incentives as employers once thought
- assumes it is possible to objectively measure performance