Honest business question.
 

Do you pay your employees more than the standard and hope that it motivates them to perform or do you pay them less and expect them to go above and beyond to make more money?

I'm curious about this.

I'm a "pay for performance" type of guy...

I pay myself cheap. Better for tax reasons.

I understand the question and don't think under paying ever motivated anyone, especially when they find out that their peers at other companies make more for similar work. I always paid very well and also expected more from employees and they knew that.

As an employee - I've left jobs that pay more for jobs that pay less because of the environment I have to work in.
Money isn't everything.
And a comfortable place of employment that doesn't quite pay as much as an uncomfortable place that pays more is worth it, in my opinion.

I've always paid competitive baseline, but offered bonuses for performance. According to an article in today's Globe + Mail, that's apparently the way a lot of other places are going as well.

Makes sense to share the benefits if someone goes the extra mile, puts in the time and the company reaps the reward. :thumbsup

money does not motivate the wrong people to do the right things. more money is not necessary when you hire the right people who are intrinsically driven to do better at everything. it would really depend on what they are doing and how fair incentive systems could be set up to evenly and fairly reward those who excel and not those who don't.

but paying people more money wiht the idea that it will motivate them to do better is a VERY bad idea. it will never work. better to fire those people and keep looking for replacements.

Offerign a good base + bonus for performances, and creating a good work environement is the way to go

it's a bit more complex than that, in a few words:
for your unskilled employees money is the best motivator;
your skilled employees not only need to be paid well, they need to find the job challenging;

don't overpay or else it will get them spoiled fast
performance benefits are cool though