According to agency theory,because employees prefer a salary,they demand higher total pay if performance-based pay is used.

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Agency theory suggests that employees prefer a stable salary rather than performance-based pay, as it ensures security and predictability. Therefore, if an organization decides to use performance-based pay, employees will demand a higher total pay to compensate for the risk and uncertainty associated with such a pay system.

According to Agency Theory,because Employees Prefer a Salary,they Demand Higher