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One of the main reasons for its failure is that it can be difficult to measure an employee’s performance accurately and fairly. For example, if an employee is working on a team project, it can be hard to determine how much of the success or failure should be attributed to each individual. Additionally, some employees may feel like they are not being rewarded fairly if their performance is not being accurately measured.

Another issue with performance-based pay is that it can lead to a sense of competition among employees. If one employee receives a larger bonus than another, it can create resentment and animosity between them. This can lead to decreased morale and productivity as well as increased turnover rates. Additionally, some employees may become overly focused on earning bonuses rather than focusing on the job itself. This can lead to poorer quality work and decreased customer satisfaction levels.

Finally, some organizations have found that performance-based pay does not always lead to better results or improved employee engagement levels. In fact, research has shown that when employees are rewarded for their efforts rather than their results, they tend to be more engaged and productive in their roles. Therefore, while performance-based pay may sound like a good idea in theory, it has often failed in practice due to its difficulty in measuring individual contributions and creating an environment of competition among employees.