You go ahead and do that, pay your employees based on the hours they are “there“.
Your competitor pays its employees based on each employee’s results.
Then let’s see which company survives in the market.
Your competitor pays its employees based on each employee’s results.
Then let’s see which company survives in the market.
If you have an average employee who complains a lot and he may leave, but that would be a hassle for you, then it makes sense to pay him a bit more so he shuts up and you don’t have to look for a new person.
Otoh, if your underpaid star developer sits quietly in his corner and all you have to do is to pat him on the back once in a while to keep him happy, why would you pay him more?
This assumption doesn't always hold.
Employee and employer might agree to share the value created which is not always a function of time spent working.
Value sharing is a basic framework for compensation negotiation. Employee wants to get all the value derived from own contribution. Employer wants to pay absolute minimum employee is willing to accept. Paying more than derived value doesn't make economic sense, so compromise will be somewhere within this range. If acceptable minimum is below the derived value, compromise is impossible. Time spent working is a free variable in all this.