Maslow's theory suggests that performance-based pay can be demotivating if it impinges upon employees' capacity to meet daily living needs.

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Maslow's theory of hierarchy of needs suggests that people have basic physiological and safety needs, and they prioritize fulfilling those needs before seeking higher level needs like recognition, achievement, and self-actualization. Therefore, if performance-based pay does not provide enough compensation for basic living needs, it can lower employees' motivation and job satisfaction.

Maslow's Theory Suggests That Performance-Based Pay Can Be Demotivating If