A limitation of performance related pay is that

• A. It always motivates all workers equally
• B. It can lead to demoralisation if only certain people getting increased pay when whole business is doing well
• C. It guarantees high pay for all
• D. It has no effect on teamwork

Answer: (B)

Performance-related pay ties pay to individual results, which can boost effort for top performers. However, a key limitation is fairness and morale: if the business is doing well but only some employees receive higher pay, others may feel undervalued and demoralised. That sense of unfairness can also undermine teamwork, as staff might focus on securing rewards for themselves rather than helping colleagues. The other statements don’t fit: pay isn’t guaranteed to motivate everyone equally, it doesn’t promise high pay for all, and while it can affect teamwork, it doesn’t have no effect at all.