What does "pay for performance" refer to in compensation strategies?

"Pay for performance" refers to compensation strategies that directly link employee pay to their job performance. This approach incentivizes employees to excel in their roles, as their financial rewards—such as bonuses or salary increases—are tied to the quality and quantity of their work. The rationale behind this strategy is that rewarding high performance encourages employees to achieve greater results and can lead to improved overall organizational performance.

In contrast, the other options describe different compensation approaches that do not align with the "pay for performance" concept. For instance, paying employees based on tenure does not consider their actual job performance but rather their length of service. Providing equal pay for all employees disregards individual contributions and performance levels entirely. Offering bonuses for company-wide profits, while it may reward overall results, does not necessarily measure or reflect an individual employee’s specific performance, which is a core aspect of the "pay for performance" philosophy.