Companies today seem to have problems with retaining and recruiting new staff, especially staff that are in great demand. This has resulted in companies having difficulties with expanding and competing in the market. One way to retain and possibly attract new employees is to implement a performance-based pay as part of the companies compensation system. Companies customize their systems as they think may increase the chances of reducing employee turnover and thus growing.

The purpose of this study was to identify the key elements in which why and in what way compensation systems with performance-based pay can increase opportunities for attracting and retaining employees in a competitive industry.

In order to accomplish this we have conducted a case study with a rather growing company within a competitive industry. In the study we used a qualitative approach as a method in which we had interviews with both the companies management team and its employees.

Based on the theory and data in our research, performance-based pay is a more attractive model because it contributes to more flexibility, responsibility and the ability to increase income. Another contributing factor to why it is considered attractive, is also that it promotes transparency between employee and employer.