What is a potential drawback of implementing individual-based pay at Fresh Munchables?

Implementing individual-based pay can indeed lead to increased costs as performance improves, making this a valid consideration. When a compensation system is tied directly to individual performance, high achievers who consistently exceed benchmarks will require higher pay to reflect their contributions. This can lead to escalating payroll costs for the organization, especially if there is no cap on potential earnings or if the performance metrics continue to encourage high pay.

Additionally, while considering other factors, it’s important to recognize that individual-based pay may sometimes create competitive environments that can be beneficial or harmful, depending on the culture of the organization. However, in this context, the financial aspect of increased costs is a significant concern, as it can strain budgets and limit the organization’s ability to sustain pay increases in the long term.

This highlights how an organization's compensation strategy must be carefully aligned with its financial capabilities and overall performance management approach.