The Case Against Pay for Performance

management 34 comments suggest edit

If you run a company, stop increasing pay based on performance reviews. No, I’m not taking advantage of all that newly legal weed in my state (Washington). I know this challenges a belief as old as business itself. It challenges something that seems so totally obvious that you’re still not convinced I’m not smoking something. But hear me out.

money money money! - by Andrew Magill CC BY 2.0

This excellent post in the Harvard Business Review Blog, Stop Basing Pay on Performance Reviews, makes a compelling case for this. It won’t take long, so please go read it. Here’s an excerpt.

If your company is like most, it tries to drive high performance by dangling money in front of employees’ noses. To implement this concept, you sit down with your direct reports every once in a while, assess them on their performance, and give them ratings, which help determine their bonuses or raises.

What a terrible system.

Performance reviews that are tied to compensation create a blame-oriented culture. It’s well known that they reinforce hierarchy, undermine collegiality, work against cooperative problem solving, discourage straight talk, and too easily become politicized. They’re self-defeating and demoralizing for all concerned. Even high performers suffer, because when their pay bumps up against the top of the salary range, their supervisors have to stop giving them raises, regardless of achievement.

The idea that more pay decreases intrinsic motivation is supported by a lot of science. In my one year at GitHub post I highlighted a talk that referred to a set of such studies:

I can pinpoint the moment that was the start of this journey to GitHub, I didn’t know it at the time. It was when I watched the RSA Animate video of Dan Pink’s talk on The surprising truth about what really motivates us.

Hint: It’s not more money.

I recommend this talk to just about everyone I know who works for a living. I’m kind of obsessed with it. It’s mind opening. Dan Pink shows how study after study demonstrate that for work that contains a cognitive element (such as programming), more pay undermines motivation.

More recently, researchers found a neurological basis to support the idea that monetary rewards undermine intrinsic motivation.

This rings true to me personally because of all the open source work I do for which I don’t get paid. I do it for the joy of building something useful, for the recognition of my peers, and because I enjoy the process of writing code.

Likewise, at work, the reason I work hard is I love the products I work on. I care about my co-workers. And I enjoy the recognition for the good work I do. The compensation doesn’t motivate me to work harder. All it does is give me the means and reason to stay at my company.

Not to mention, should the company dangle a bonus to improve my performance, there’s some questions to ask. Why wasn’t I already trying to improve my performance? Where will this new performance come from? Often, the extra performance comes from attempting to work long hours which backfires and is unsustainable.

So what’s the alternative?

Pay according to the market

This is what Lear did, emphasis mine:

In 2010, we replaced annual performance reviews with quarterly sessions in which employees talk to their supervisors about their past and future work, with a focus on gaining new skills and mitigating weaknesses. We rolled out the change to our 115,000 employees across 36 countries, some of which had cultures far different from that of our American base.

The quarterly review sessions have no connection to decisions on pay. None. Employees might have been skeptical at first, so to drive the point home, we dropped annual individual raises. Instead we adjust pay only according to changing local markets.

They pay according to the market.

This makes a lot of sense when you consider the purpose of compensation:

  • It’s an exchange of money for work.
  • It helps a company attract and hire talent.
  • It helps a company retain talent.

It’s not a reward. You wouldn’t go to your neighborhood kid and say, “Hey, I’ll pay you 50% of what the market would normally offer you, but I’ll increase it 4% every year if you do a really good job.” The kid would rightfully give you the middle finger. But companies do this to employees all the time. Don’t believe me?

A recent study showed,

Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more.

Keep in mind that 50% is a conservative number at the lowest end of the spectrum. This is assuming that your career is only going to last 10 years. The longer you work, the greater the difference will become over your lifetime.

Let that sink in.

If your employees act rationally, they’d be stupid to stay at your company for longer than two years watching their pay drop over the years in comparison to the market for their skills. And if they wise up and leave every two years, the turnover is very costly. The total cost of turnover can be as high as 150% of an employee’s salary when you factor in lost opportunity costs and the time and expense in hiring a replacement.

So even if you decide to continue on a pay for performance system, market forces necessitate that you adjust pay to market value. Or continue selling your employees a story about how they should stay out of “loyalty”. This story is never bidirectional.

And what should you do if someone tries to take advantage of the system and consistently underperforms? You fire them. They are not upholding their side of the exchange. Most of the time, people want to do good work. Optimize for that scenario. People will have occasional ruts. Help them through it. That’s what the separate performance reviews are for. It provides a means of providing candid feedback without the extra charged atmosphere that money can bring to the discussion.

The Netflix model

This is one area where I think the Netflix model is very interesting. They try to pay top of market for each employee using the following test:

  1. What could person get elsewhere?
  2. What could we pay for replacement?
  3. What would we pay to keep that person (if they had a bigger offer elsewhere)?

After all, when you hire someone, the offer is usually based on the market. So why stop adjusting it after that? This also solves the problem I’ve seen companies run into when the market is hot, they’ll hire a fresh college grad for more than a much more experienced developer makes because the developer’s performance bonuses haven’t kept up with the market.

Keep in mind, this is good for employees too. If an employee wants to make more money, they will focus on increasing their value to your company and the market as a whole. This aligns the employee’s interest with the company’s interest.

Another cool feature of the Netflix model is they give employees a choice to take as much or as little of that compensation as stock instead of cash. I think that’s a great way to give employees a choice in how they invest in the company’s future.


If you insist on continuing to believe that bonuses for performance is the right approach, I’d be curious to hear what science and data you have that refutes the evidence presented by the various people I’ve referenced. What do you know that they don’t? It’d make for some interesting research.

UPDATE: Based on some comments, there’s one thing I want to clarify. I don’t think the evidence suggests that all companies should pay absolute top of Market. That’s not what I’m suggesting. Many companies can’t afford that and offer other compensating factors to lure developers. For example, a desirable company that makes amazing products might be able to get away with paying closer to the market average because of the prestige and excitement of working there.

The point is not that you have to be at 99%. The point is to use the market value for an individual’s skills as your index for compensation adjustments. When it goes up, you raise accordingly. When it flatlines or goes down, well, I’m not sure what Lear does. I certainly wouldn’t lower salaries. I’d just stop having raises until the market value is above an individual’s current pay. I’d be curious to hear what others think.

Found a typo or error? Suggest an edit! If accepted, your contribution is listed automatically here.



34 responses

  1. Avatar for ninlar
    ninlar August 14th, 2014

    I agree that working somewhere for ten years with annual raises based on performance would most likely yield you less than if you moved around, and you were able to get more of a "fair market" offer at each place. I know that was true for me, and I was shocked when I almost went somewhere else and saw what the offer was for me to stay. That being said moving around too much makes you less attractive to employers as well, since you don't look like a long-term investment.

    In this model what happens when you have another bubble burst in the software industry? Right now the app stores are saturated with multitudinous apps, and five clones of each, for everything along with tons of social media companies being valued at billions of dollars while generating no profit. What happens when the layoffs occur and the market dictates lower salaries as the supply increases while the demand does not? How do I hedge my losses to my salary? I guess in that situation you'd be as screwed as the guy getting his annual performance based raises if you were out a job and seeking a new one. But if everyone did move to this model, is it possible that salary adjustments go in the opposite direction as supply increases or demand decreases?

    One thing you did mention at the beginning is that the current model discourages collaboration with others and cooperative work environments. I think that is true if you have the old Microsoft model where you are ranked relative to your teammates and your salary adjustments are based off of that; however, if your performance is simply evaluated with respect to you I don't see why it would discourage collaboration. I enjoy collaborating with my co-workers, and we enjoy sharing tips and tricks that we learn along the way. In the end, I'm not really competing against them.

  2. Avatar for Mateus Carvalho
    Mateus Carvalho August 14th, 2014

    Alright I do agree with all this and as I said on the twit I was skeptical about it when I first started reading, but later on I got convinced. But here is some food for thought.
    This system works because the other system is not gone, and here is why. The premise is that you are going to use market (local) as the basis for the raise, and that will benefit both the company (retention, will to improve without compensation) and the employee (good moneys, etc.). But after a little while, once every company switches to this model, wages are going to level up, and become stable since no one is going to need to move, and no one is being awarded. Review after review the wage is going to be the same, and then what happens, how a person that is doing quite well would progress, do we just go back to the old model, or allow them to go work in other places as a way to get more money, do we give them vacations, what happens?

  3. Avatar for Nick Nobody
    Nick Nobody August 14th, 2014

    Did you know your "managment" tag is spelled wrong? Just sayin'.

  4. Avatar for haacked
    haacked August 14th, 2014

    How embarrassing! Thanks for the correction.

  5. Avatar for Binary Worrier
    Binary Worrier August 15th, 2014

    I couldn't agree more.
    I worked in the I.T. department of a financial institution for several years, and we had twice weekly performance reviews. Your score from the review was directly related to your annual bonus.
    To be honest I found the entire premise slightly insulting. I work hard, and I do the best work I can. So if you give me an average rating it obviously means you think I can do better. If I could do better I'd already be doing it. "What's that you're dangling over my head, a banana? Monkey jump for banana!".
    For years I consistently scored above average for my role (thank you for the bonus, it doesn't affect how hard I work, as I always try to do my best), until they created a new role, just for me, to recognise the good work I was doing.
    Wow, big feather in my cap eh? (NB there was no associated pay rise for this role, it was just a title "Junior Technical Architect")
    Thereafter I scored average on performance reviews - earning a far lower bonus - because I was doing what was expected of a Junior Technical Architect, I'd need to excel to get the larger bonus. Really dude? Why F@&k you very much too!
    I was honestly surprised by how demoralizing that was, and I was gone from that company within a year.

  6. Avatar for Brad Westness
    Brad Westness August 15th, 2014

    Agreed on the last point. Performance reviews should be based on how close each employee came to achieving his or her full potential, not comparison to peers. That's like flunking a kid in physical education class because he wasn't in the top 10% of times for running the mile among his classmates, even if he showed a lot of effort and improvement over the year and set a personal best time.

  7. Avatar for Brad Westness
    Brad Westness August 15th, 2014

    While we're editing, there's also a typo in the second sentence after 'of': "I'm not taking advantage of l that newly legal..."

  8. Avatar for Brad Westness
    Brad Westness August 15th, 2014

    The other thing that tends to happen is that if the organization simply can't give out bonuses one year for whatever reason, they're forced to find some pedantic reason to downgrade everyone's performance into non-bonus territory, which is horrendous for morale.

  9. Avatar for George
    George August 15th, 2014

    There is another issue with this idea: in many countries it is very, very hard to find out the true average and maximum salary for a certain skillset in the industry: the salary is secret, the job ads never mention it so all is based on rumors and hearsay..

  10. Avatar for Phaedrus
    Phaedrus August 15th, 2014

    About the Netflix model, doesn't it just all boil down to point 3:

    "What would we pay to keep that person (if they had a bigger offer elsewhere)?"

    The other's are irrelevant in most cases as they depend on circumstances. Not all companies are rolling in cash and not all employees can get market rate salaries. The only question for the company is: How much can we afford? Companies should always assume any given employer has a better offer elsewhere and then determine how much more they could pay that employee without over stretching themselves. And THAT figure is what the given employee's salary should actually be now. It should not be an offer that is made when they resign. This way if they do resign, as a company you can feel happy that you have done all you can to keep them and bid them good luck and farewell.

    Note: all of this assumes that you are being "nice" to your employees. I believe many employees resign over matters not related to pay.

  11. Avatar for Raif
    Raif August 17th, 2014

    The main flaw in this plan is that often either employees nor employer have a clear idea of market rate. Further, when I take a new job generally they ask what I'm currently making and then what I would like to be making. From there the negotiations begin. The idea of market value only comes up implicitly when you ask for more then they can give you.
    Lastly, my current company implemented this plan with no official anouncement. At review time I was just told that there would be no more raises except for those who were currently below market. Those twats. Made me want to start looking right away. I knew that I was doing a great job and I felt some form of acknowledgment was do. Instead I was told to get used to my salary. Furthermore, i feel pretty sure i could make more elsewhere very easily. It just happens that I really enjoy what I'm building right now. So ill stay till something even more interesting comes along and then I'll leave with resentment. . Clearly a bad implementation.

  12. Avatar for Alex Topiler
    Alex Topiler August 17th, 2014

    I actually strongly disagree with this model.

    I could be wrong, but here's why:

    You're right, compensation is not a good motivator and Daniel Pink is totally right. However, in my opinion, the critical mistake is putting compensation and motivation into the same conversation, and THAT's actually the flaw in most models. Again, I could be totally wrong, but the way I see it, paying for performance isn't a motivation tactic, it's recognition for adding value to the company and it's positive reinforcement for making impactful contributions. It's when you think you're motivating your team with compensation that you start getting into trouble. (we don't have to talk about what motivates people, we both agree on that 100%).

    All that said, performance-based compensation (either cash or equity) is still a very important dynamic for other reasons. It's showing that the company is paying attention and values a team member for everything that they do in a tangible way. It's also a tangible consequence to how a certain member of the team responds to expectations that are set and feedback that is given throughout the year (if for example, there's year-end performance-based comp.). Without a tangible way to say something like, "hey, you really killed it and went above and beyond what we expected - you embodied X, Y, Z company values and you made the team around you better. We really value you and want you to keep doing what you're doing.. etc.", or "Hey, we talked about A, B and C and you really didn't deliver on B and C... ", how do you expect someone to take anything you're trying to encourage seriously? Yes, there are other ways to offer recognition, and there are other ways to get people back on the right track.. performance-based comp cannot be the only recognition given - I do not think that would work. I do think it's pretty important piece though.


  13. Avatar for haacked
    haacked August 17th, 2014

    But Dan Pink cites study after study that shows this approach has an actual demotivating effect. What evidence do you have to contradict that?

  14. Avatar for Raif
    Raif August 17th, 2014

    I haven't read Pinks research, but let me offer an analogy, There are countless shops out there that are "agile". Perhaps 1 in 10 of them know there ass from a hole in the wall. If we were to do research on agile shops, I imagine we would find some pretty strange things. We might find that agile just meant not taking responsibility for your work or your dead lines or business interests.
    I don't mean to impune anyone's character, but ones research may lead to conclusions that are exactly in the interest of big business and not in the interest of the prolet... the worker.
    seriously though, this is sociology, not mathematics, and as such there is a wide range of results that can be expected.
    I can tell you first hand that business cares very much about money. The entire system is predicated on more money equals good, less money equals bad. The business isn't going to come down and speak to me on my level about the cool things I'm doing, how I'm reducing error rates and making the code more extensible. The business can only speak to me in the language it knows. And when I do great work but I make as much (supposedly) as some other bloke so I don't get a raise or a bonus, that tells me that the business doesn't value me.
    as an aside, agile that is practices correctly is the exact opposite of what I said above. The point is that bad implementation ( which seems to be the rule with agile ) leads to bad results. That should not color the assessment of the idea.

  15. Avatar for haacked
    haacked August 17th, 2014

    Again, no evidence. I pointed to a study that shows that after 10 years, you make 50% of what you would if you moved around every two years. That's definitely _not_ a result that favors the interests of "big business".

    That's evidence that the current predominant model of pay for performance doesn't work. The reason you make more by moving every two years is because a company that you don't yet work for _must_ pay something commensurate with the market in order to attract people.

    The problem is, they don't then re-balance their existing employees who've been loyal when they do this. That's the point of this article. The pay of the employees should never fall out of lockstep with the market.

    Who cares if you make more than some "other bloke" because you do great work and the bloke doesn't if you're way under market?

  16. Avatar for Dirk Kok
    Dirk Kok August 18th, 2014

    Great article.

    I would like to know you opinion on incentive remuneration e.g.
    end of year bonus. At the moment we are using performance reviews to give
    us an indication of a person’s performance relative to their current role and
    their peers. Using this we then apportion the bonus pool to the individual

    We do find the same issues you highlighted. People are chasing high scores for the
    sake of the score rather than advancing themselves and their careers. Ideally
    we want to pay people an incentive bonus but are clueless on a good method to
    distribute the wealth.

    Any thoughts?

  17. Avatar for Alex Topiler
    Alex Topiler August 18th, 2014

    I'm not trying to contradict that :)

    In the absence of true intrinsic motivators, yes, performance-based compensation can have a demotivating effect in some circumstances. My point was that if you try to use compensation as your primary motivator (or any kind of motivator, for that matter), then you've already failed.

    Recognition != Motivation. Nor should recognition (read, performance-based comp.) be given with an expectation of reciprocity via increased motivation.

  18. Avatar for Raif
    Raif August 18th, 2014

    These are good points, an your right I don't have evidence, merely personal experience, a heuristic, my speculation.
    The issue I have is that a good cconscientious employer, like those who would be reading this post, will try to do the most effective thing for business and employees. But many or most, could (and so far in my experience do) use this research to validate pay freeze, sighting a very fuzzy market rate.
    One last issue I want to mention, is how am I to counter the statement that I make the market rate? I have to go out interview get an offer then come back and say "see? This is the market rate" . This of course is disingenuous to the other company. I feel that fair market price is whatever my employer feels they "can" pay me.

  19. Avatar for haacked
    haacked August 18th, 2014

    > My point was that if you try to use compensation as your primary motivator (or any kind of motivator, for that matter), then you've already failed.

    Oh, I absolutely agree with that!

    I was confused because you said you disagree with this model. This model is about correcting a demotivating force. It's not about how to motivate. It's about how to pay people fairly over time.

    I plan on writing up my thoughts on better approaches to motivation in the future. :)

  20. Avatar for haacked
    haacked August 18th, 2014

    Based on these studies I've read, the end-of-year individual performance bonus doesn't

    work. The problem of course is now that people have come to expect them, they're hard to take away.

    I don't know your situation, but some ideas I'd have. Look at how much your employees are paid relative to the market. If they're under market, use the bonus pool to give them a bump in salary.

    Maybe try and disassociate the end-of-year bonus with last year's immediate result and make it tied more towards long term growth. One way to do that might be to tie the bonus amount according to "level" rather than individual performance. That means to get a bigger bonus, you need to get promoted.

    If you insist on giving performance based bonuses, at the very least, do it at the team level. Check out this article by Mary Poppendieck.

    If you make any changes, I'd love to hear how it works out!

  21. Avatar for Alex Topiler
    Alex Topiler August 18th, 2014

    Gotcha - that makes sense! Looking forward to reading it :)

  22. Avatar for kenckar
    kenckar August 25th, 2014

    I think the model is pretty interesting. I agree with the people who say that finding actual market rates will be difficult. I also think that there are people who are exceptional and you should find a way to compensate them more. Going past that though, in a market of increasing pay for a given job, the employees would be happy. However...
    If market salaries are decreasing, employees will be very unhappy. I'm not sure what to do about that.

  23. Avatar for Justin Hewlett
    Justin Hewlett August 25th, 2014

    I like the advice to never reveal what you're currently making. This has worked well for me in the past.

  24. Avatar for Justin Hewlett
    Justin Hewlett August 25th, 2014

    How do you measure the performance of a programmer? And why would you base pay on an imperfect (and potentially harmful) measure?

  25. Avatar for Justin Hewlett
    Justin Hewlett August 25th, 2014

    Deming has a good model for this. Basically he advocated profit sharing, where all employees receive a certain percentage of company profit. This way, the "bonus" is connected with the performance of the entire company (the "system") and not individual efforts, which may or may not be in the best interest of the company. (E.g. meeting a sales quota may make an individual stand out, but net the company a loss in the long run if the new customers are not a good fit.)

    Profit sharing is also good in that, as a lagging indicator, it is difficult to use it to try to motivate employees.

  26. Avatar for Dirk Kok
    Dirk Kok August 26th, 2014

    Hi Justin

    We have the profit share in place. The challenge is what method is used to allocate the share to the various employees. At the moment we are using performance scores to rank people and then allocate the bonus based on a multiple of their cost to company.

    The issue with this is that people chase a high rating during reviews (which happen quarterly) rather than just focusing on improving themselves in terms of their careers.

    Ideally we would like to decouple this as per the original article. We also want to reward people who are stars with more of the profits vs. the average employee.

  27. Avatar for Justin Hewlett
    Justin Hewlett August 27th, 2014

    The system that was explained to me paid all employees the same fixed percentage of company profit. This goes along with the Deming philosophy that 85% of the output of your employees can be attributed to the system they work in, with only 15% attributed to individual performance. This also prevents chasing high ratings during reviews like you mentioned.

  28. Avatar for Ricardo Oneda
    Ricardo Oneda September 6th, 2014

    I recommend the book "Abolishing Performance Appraisals: Why They Backfire and What to Do Instead"

  29. Avatar for Silly Dog
    Silly Dog September 7th, 2014

    Here's your evidence. I won't work for anyone or any situation that doesn't reward value that I add over the alternatives. How's that for evidence? Seriously, you should re-read his point. Have you done an exhaustive review of all of the research he cited? Are you so sure it's flawless? Sorry but we don't all live in this communist, Agile software utopia that so many people seem to be trying to peddle these days.

  30. Avatar for haacked
    haacked September 8th, 2014

    Your feelings on the matter is an anecdote, not evidence. Clearly you've missed the whole point of my post if you call it "communist". What could be more capitalist than letting the market dictate your pay as opposed to how hard you work regardless of the market value of that work?

    Also, under such a plan, your performance is rewarded, but over a longer period of time as you increase your personal market value. But even that has to be tied with gaining skills and abilities that are valuable in the market. If you're a great mail sorter, I don't care how good you perform, there will be a ceiling on what you can expect to be paid.

    And if his research is flawed, it shouldn't be hard to find solid research that counters it.

  31. Avatar for chuckblakeman
    chuckblakeman November 11th, 2014

    This approach institutionalizes mediocrity, the same thing all the traditional time-based pay systems encourage. People don't work for money, they work for meaning, and if everyone I work with gets the same pay I do, it communicates my great work has no more meaning than their lousy work. So why work any harder than the guy beside me? I'll just cruise.

    For someone who is "better than the market", they should be paid a lot more than someone who is average. Not because they are motivated by money, but because they are motivated by knowing that they're being recognized for being great. When a business owner outperforms another business owner, they make more money. Everyone should be treated like a business owner.

    The other thing this article doesn't recognize is that money is only one source of results-based incentive you can give. Time is the new money and many people are more motivated by having control of their time back than even making more money.

    Finally, you're missing the correlation between performance reviews and performance pay. The performance review is one of the worst leftovers of the Industrial Age Factory System and are never correlated to performance. They should be done away with entirely and replaced with specific metrics for quality, quantity, teamwork, and other metrics that make the company successful. Then pay for performance is truly that, not some manager making subjective decisions about their favorite employee.

    The biggest refutation of this is that so many companies are using it so successfully. Ivory tower studies don't hold up to real world stories. Here's just one of thousands of examples.

    In the coming two decades, results-based pay will almost completely replace time-based pay. Those companies that embrace this move to "the Participation Age" will thrive. Those that don't will be left behind. See my TEDx on this subject -

  32. Avatar for mo
    mo December 9th, 2014

    Is the end result of this just to substitute the anti-cooperative scramble for performance based pay with an anti-cooperative scramble for promotion?

  33. Avatar for Dagwood
    Dagwood February 7th, 2015

    It’s true; we are motivated and work for intrinsic reasons.
    We survive from extrinsic reasons. This is why money doesn’t make you work
    faster though cost of living requires money and it’s directly tied to sustaining
    your quality of life. Additionally, intrinsic motivators are based on extrinsic
    motivators. You will perform better when you genuinely like and trust your
    coworkers and leadership team. That trust is generally given to you as extrinsic
    act of kindness. This being many factors of money, benefits, good will, kind
    words, people looking out for you, etc…

    I think annual (maintain cost of living) raises to adjust market
    changes should never go away. The “adjustable wages” based on market rate of a
    profession is a nice concept to think about though companies will not willingly
    increase wages of current employees without a vice. I mean like head clamped in
    while kicking and screaming. Remember, we live in a capitalistic society where
    the big boys want to keep getting richer. Pay per performance is not an IT
    thing. It’s a culture thing starting with the financial markets. Companies that
    don’t perform well get punished in the financial system. The concept of the
    bonus system is if the company does well, they will share a little of the
    wealth with employees. This in turn increases the employee’s intrinsic likability
    factor for the company. This is like when you get a great deal on a car, you
    take the kids out to a nice place for dinner. The problems arise from the greed
    of leaders who loose site of why they are giving the bonus. It’s like telling
    your kids you got a bonus at work and you are taking them out later that month,
    though you tell them they have to keep their rooms clean, get A’s on all homework,
    and not be disrespectful or they won’t. This would take the wind out of the
    sail of the original act of kindness. It really comes down to be kind and just with
    people and they will be kind and just with you.

  34. Avatar for Nate H
    Nate H April 20th, 2016

    Good overall article. However, one point where I disagree with the Netflix model is that there's zero job security. That would typically make everyone a professional consultant, which implies higher pay since consultants must live "gig to gig." Re-branding a consultancy as a "job" by slapping on some (relatively cheap) benefits packages allows you to market your "jobs" as paying "top of market salaries," when, in fact, if you reconsidered those workers as consultants or private contractors (which is more or less practically what they are), the pay is probably just middling. Food for thought.